Growth Comes Back Into Property Markets
After a record run of interest rate rises, growth is now once again starting to emerge in some of Australia’s key property markets and as we’ve been saying for some months, it now looks like the worst is behind us.
The latest data from CoreLogic is now showing that the high-end suburbs across Sydney are some of the areas that are leading the rebound. CoreLogic said the lift in housing values has been most evident across the upper quartile of Sydney’s housing market. House values within the most expensive quarter of Sydney’s market were up 2 per cent in March and the upper quartile of the Sydney unit market was 1.4 per cent higher over the month.
I’ve previously mentioned that during this period of property market declines many homebuyers have been struggling to secure properties at the mid and upper end of the Sydney market and with steady demand and tight supply, it’s no surprise that we are again starting to see that growth emerge.
It is now also starting to look like the doomsday scenarios that many experts were predicting are also not likely to come to fruition. In reality, for buyers in Sydney who have been waiting and hoping for prices to decline substantially before they buy, they might have now missed the boat to some extent.
For all the talk of widespread price falls, it’s easy to forget that property is a lot more than just a commodity. While it is a lot easier for the stock market to decline 25 per cent as investors pivot into other asset classes, there is always going to be a fundamental need for housing. This need is also growing at a fast rate with record levels of immigration returning to Australia. While at the same time, we’ve seen the impact of increased smaller households during the COVID years continue to put pressure on the supply side.
While there are also still risks to the housing market, particularly in the form of the fixed rate interest rate cliff and the fact that inflation is still lingering well above the RBA’s target band, there are also a lot of underlying factors that continue to offset those risks, such as record low unemployment and a rising population.
Some years ago, I said that after COVID ends Australia will end up being one of the locations people choose to live and that is now what we are seeing happen. We are still yet to see the full impacts of open international borders and the return of Chinese students, Indian students are now also entering Australia at a record rate and putting pressure on housing supply. Rental markets are continuing to show increased tightness and very strong price growth.
All these factors suggest that the downside in property prices might now be declining and we are more likely to start to see growth come back into many of Australia’s residential property markets. For now, the growth is still focused mostly in the higher-end suburbs in Sydney and across some of the smaller capital cities and the tightly held and affordable regional areas.
However, the fact that the market has once again held up so well, will also be a big factor in boosting that positive sentiment. We can also see from the latest data on auction clearance rates, that many markets continue to show resilience.
Last week the auction clearance rate was 61.5 per cent, according to CoreLogic, driven by increases in Sydney and Melbourne. The combined capital city clearance rate was the highest since mid-March 2022 (68.9 per cent), with 68.1 per cent of auctions returning a successful result. This latest result is also 5.7 percentage points higher than the rate recorded this time last year when 62.4 per cent of auctions were successful.
Again, I’ve been saying for some time that the market is actually showing signs of improving and we are starting to see that on the ground and now with the data starting to say the same thing.
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