Australian Property Market: Cooling Prices or a Surprising Rebound?

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The Australian property market, traditionally busier during the spring season, hasn’t seen the expected surge in listings, leading to intensified competition and maintained elevated prices. On the other hand, despite a tightening policy campaign, Australian house prices are positioned for an unprecedented annual rebound.

Jessica Taulaga from Domain highlights that new property listings in Sydney and Melbourne surged at the end of winter but have significantly slowed down halfway through the spring season. “We have a situation where listings are the lowest in 30 years in certain areas,” says Peter Kelaher, Director of PK Property Buyer’s Agents in Sydney. This data aligns with the findings from Domain that the number of new listings across combined capital cities dropped 12.3% over September and 0.7% year-on-year.

The anticipation was for the property market to cool down in 2023 due to factors such as high inflation and mortgage rates. However, Dr. Peng Yew Wong from RMIT University states that the predictions were “significantly off the mark.” He mentions, “But the housing market has cycles… and the key driver of this market is the shortage of supply. Demand is more than supply and that will push up prices, regardless of other economic factors.” Peter Kelaher adds that the current auction clearance rates, although steady, are lower than what would be expected at this time of the year.

According to a Business Times article, Australian house prices are set for a 7.7% rise this year, recovering from the previous year’s 4.8% decline, despite the Reserve Bank of Australia’s (RBA) aggressive policy-tightening. This kind of recovery amidst rate hikes has not been witnessed since the early 1990s. The RBA’s recent hikes were implemented to control an inflation rate that consistently surpasses the target range. This rebound in house prices is attributed to factors like the supply crunch and post-pandemic population boom.

The bullish perspective on housing is also boosted by an updated methodology from CoreLogic, pushing the pandemic-era gain in home prices to 26.6% from 23.1% between February 2020 and April 2022. Such revisions led banks like the Commonwealth Bank of Australia to upgrade their forecasts. A point of agreement between both articles is the pressing issue of supply. As Nerida Conisbee, chief economist at Ray White, puts it, “For housing policy, it simply means that we won’t fix affordability until we fix housing supply.”

The robust economy, with unemployment levels reminiscent of the 1970s, continues to drive housing demand. As CoreLogic Economist Eliza Owen suggests, “It stands to reason at the moment that housing values would continue to rise in the near term.”

In the face of contrasting forecasts, one thing is certain: for potential sellers aiming to list before Christmas, the coming weeks will be crucial. As Conisbee summarizes, “the next two weeks are really critical for sellers.”

References:

“Are prices cooling off? Here’s where Australia’s property market is at, halfway through spring” by Jessica Taulaga. https://www.domain.com.au/news/how-australias-property-market-is-faring-this-spring-1242625/ 

“Australia’s house prices set for first rebound during rate hikes” by The Business Times. https://www.businesstimes.com.sg/property/australias-house-prices-set-first-rebound-during-rate-hikes