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Home › Blog › Has the Australian Property Market Hit Rock Bottom?
Is it a case of a new year and a new direction – hopefully upwards – for Australian property prices, or will we see more of the declines like we did in 2022?
Experts have differing views on this one, however we are now starting to hear more positive views than negative when it comes to rate rises and the market in general.
Whatever the case, it’s certainly going to be an interesting year for real estate in 2023.
The property market is constantly changing, so the key to it staying in your favour is going to be making sure you’re up to date with all the latest trends and, as always, seeking expert advice.
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CoreLogic’s December Chart Pack provided a comprehensive picture of the residential property market, such as the combined value of residential real estate, sales volumes and listing trends.
The market has just recorded the largest calendar year decline in home values since 2008, with property values in Australia -5.3% lower over the past 12 months.
The month of December saw the national decline at -1.1%, steeper than the -1.0% fall in November, but still below the -1.6% peak recorded in August 2022.
Properties are also now spending more time on the market – the days of a quick sale are becoming few and far in between. In the three months to December, the median days on the market was 34, up from a low of 20 in the three months to November 2021.
And in a bid to combat this, sellers are becoming more likely to discount their price to attract more buyers – from -2.9% in the three months to November 2021 to -4.3% in the three months to December 2022.
You could think this alone paints quite a bleak outlook, until the market was hit with another whammy.
The CoreLogic Daily Home Value Index (HVI) indicating a record decline of 8.40% on 7 January 2023 after peaking on 7 May 2022.
“The result takes the national housing downturn into new territory, breaking the previous record in peak-to-trough declines, when home values fell -8.38% between October 2017 and June 2019.
“While the housing downturn between 2017 and 2019 lasted 20 months, the new record-breaking price falls have played out in less than nine months, with further falls expected in the months ahead.”
Annual value falls were the most significant in Sydney (-12.1%) and Melbourne (-8.1%) where conditions peaked early in the year.
Hobart (-6.9%), the ACT (-3.3%), and Brisbane (-1.1%) also recorded an annual drop in housing values, while three capitals saw values rise over the year: Adelaide (10.1%), Darwin (4.3%), and Perth (3.6%).
CoreLogic’s Research Director, Tim Lawless, said this has been a year of contrasts, with housing values mostly rising through the first four months of the year, but falling sharply as the RBA commenced the fastest rate tightening cycle on record.
If we look at the regional areas combined, figures indicate housing values over the year mostly stayed the same (+0.1%).
Mixed results across the States saw falls across regional NSW (-2.7%) and regional Victoria (-1.3%) offset the gains among the remaining regional markets.
“Regional SA has been the stand-out for growth conditions over the past year, with values up 17.1% through 2022,” Mr Lawless said. “The well-known Barossa wine region led the capital gains with a 23.0% rise in values over the calendar year.”
CoreLogic Economist Kaytlin Ezzy said their new Mapping the Market Report has confirmed the extent of the housing market downswing and demonstrated the diversity between capital cities, houses and units.
She said fewer than 10% of house and unit markets recorded a decline in value in the December quarter 2021, serving as a stark reminder of how dramatically Australia’s housing market has moved from boom to bust.
“The market downswing doesn’t discriminate, with only a small proportion of suburban areas riding a wave of positive growth among the sea of declining values,” she said.
“This has resulted in a reduction in the number of million-dollar suburbs, particularly in our most expensive housing market, Sydney, with the most resilient suburbs found in more affordable areas and within the unit sector.
“The downswing has meant buyers who were previously priced out of some markets might start to see opportunities appearing, particularly in cities where larger downturns have been recorded such as Sydney, Melbourne, Brisbane, Hobart and Canberra. However, it’s likely much of the benefits of falling values have been offset, with rising interest rates pushing serviceability buffers and mortgage repayments higher.”
The main one being two words. Interest. Rates.
Potential buyers are now limited in how much they can borrow which goes hand in hand with how much they can offer for homes – and some people may be reluctant to enter the market in this current environment.
We’ve also found ourselves with more household debt than previous years, higher inflationary pressures, and a surge in spending post-lockdown has eroded household savings.
This is all adding up to the perfect storm so to speak we’re finding the market in today.
It’s also a case of there always being a comedown from the previous ‘boom’ years of elevated sales and listings driven by record low interest rates, low-deposit home loan schemes and government stimulus packages.
Considering one of the big reasons we’re experiencing such record falls is the increase in interest rates, below is a look at what the big four are currently predicting for the first half of 2023.
Source: mozo.com.au December 2022
Let’s cast our minds back to 12 months ago to see just how much upward movement there’s been in interest rates. CBA and NAB’s variable rate were both sitting at 2.29% with ANZ and CBA even lower at 2.19%.
However, the good news in all of this is that the experts are now predicting the majority of these pesky increases are now behind us and there could even be some cuts at the end of the year.
With the above good news and the prediction that the cash rate is expected to stop its climb at 4%, we may hear a collective sigh of relief at the prospect of property prices starting to stabilise.
Eleanor Creagh, Senior Economist at PropTrack said tight rental markets and price pressures, foreign migration, stronger wages growth, and over the long run, housing supply pressures will help drive prices back up.
And although it’s been said many times, it can’t be ignored that despite the downturn across many areas in Australia, housing values for the most part remain well above pre-COVID levels.
Across the combined capital cities, dwelling values remained 11.7% above where they were at the onset of COVID (March 2020), while values across the combined regional markets are still up 32.2%.
If you’re wanting to know when the right time might be in 2023 to look at selling your home, call our local expert team on 1300 665 557 or compare agents now to connect with experienced, local agents.
Photo by Arthur Guiot on Unsplash
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Interest Rate Rises and the Australian Property Market [2023]
Who will be impacted by the latest interest rate rise?
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