Australia’s Real Estate Market Sees Modest Growth Amidst Increasing Property Listings

Australia’s house price growth saw a slight decline in July, influenced by an unusual surge in property listings during winter months. Typically, vendors hold off on selling during these colder months, however, this year seems to have deviated from the norm, potentially signalling sellers capitalising on current market conditions. Experts predict this could also be the early sign of ‘motivated selling’ as rapid rate hiking impacts household budgets.

According to data from property consultancy CoreLogic Inc., prices across Australia’s capital cities increased by 0.8% for the fifth consecutive month, although at a slower pace than June’s 1.2%. Market bellwethers Sydney and Melbourne witnessed growth rates of 0.9% and 0.3%, respectively.

Research director at CoreLogic, Tim Lawless, stated that July’s cooling in growth was led by the upper quartile of the market, which tends to be a “sign of a broader easing in the pace of growth over the coming months.”

Simultaneously, the Ray White July 2023 Listing Report revealed an unexpected rise in new listings for July, up by 5% month-on-month for combined capital cities. However, year-on-year, new listings activity was lower by 10.5%, and total listings for July 2023 were down 3% from the previous year.

Despite these mixed signals, Australia’s job market remains resilient with unemployment at a remarkable low of 3.5%.

However, concerns have been raised regarding the financial sustainability of homeowners in light of the Reserve Bank of Australia (RBA) increasing its key rate to 4.1% – the highest since April 2012. This has led to a decrease in consumer sentiment and a subsequent impact on the housing market.

Chief economist at AMP Capital Markets, Shane Oliver, suggests that a borrower with a 20% deposit and earning a full-time average wage has a 29% lower “capacity to pay” for a home than in April last year. These tightened financial conditions have raised concerns about the potential for increased distressed sales and negative cash flow for over 15% of variable rate borrowers by the year’s end.

However, James McIntyre, an economist from Bloomberg Economics, argues that despite the cooling market, the Australian housing market has remained resilient due to strong population growth and a supply shortage. He suggests that the ongoing trend in advertised stock levels will be key in determining future market outcomes.

In a similar vein, Tim Lawless has stated, “Overall, the housing market remains resilient to a double dip downturn. The trend in advertised stock levels will be a key factor determining housing market outcomes.”

With these mixed signals, it remains to be seen how the Australian real estate market will react to these various forces in the coming months.

References

Pandey, S. (2023). Australia’s House-Price Gains Ease as Property Listings Jump. Bloomberg. https://finance.yahoo.com/news/australia-house-price-momentum-eases-140100287.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAKDHOq1xtefDcrXySDaRfe9y6WCvTRwnBshxsFsak113TSLg9lg1p1z6frhEcDK6fWKAhdzI5C22VwBzQev4nhAkW5XMavzcoBD5jSlT3MZRjfFMpuzs991QM_vrqDFmIzXPjvnSHc0d5GfsPzEFh5WZN2PDVZmq5ZYVScMDg8eF

Property Tribune (2023). July property listings improve, but remain below 2022 levels. ↩