Quote Of The Week
“History tells us that, in the last 30 years, the duration and steepness of an upswing are longer and greater than a downturn, supporting the idea that it’s not timing the market, it’s the time spent IN the market that counts.”
Domain chief of research and economics Nicola Powell
Prices Up 27% Despite Downturn
Australian property prices remain well above 2020 levels despite some recent softening in the market.
According to Domain’s End of Year Wrap, house prices across the combined capitals have fallen 4.9% from their peak in March 2022 but are still 27% higher than mid-2020.
The combined regions have performed even better, remaining 30% higher during the same period.
Domain chief of research and economics Nicola Powell says it is inevitable there would be some adjustment to prices in 2022 but it hasn’t resulted in massive price drops.
On a capital city basis, Hobart and Adelaide prices are still 47% higher, Canberra is 41% higher and Brisbane 36%.
Darwin is 30% higher, Perth 22%, Sydney 29% and Melbourne 17%.
“History tells us that, in the last 30 years, the duration and steepness of an upswing are longer and greater than a downturn, supporting the idea that it’s not timing the market, it’s the time spent in the market that counts,” Powell says.
Dwelling Rents Rise 24% In 2022
Residential rents in capital city Australia are 24% higher than a year ago, according to the latest Rents Index from SQM Research.
Five of the eight capital cities have recorded annual growth of 20% or more in their rents, headed by Sydney which is up 28%.
Close behind is Melbourne on 24%, Brisbane on 23% and both Perth and Adelaide where residential rents have increased 20%.
Canberra, Hobart and Darwin have recorded more moderate increases in rents, according to the SQM index.
The figures provide further evidence of the impact of record low vacancy rates across Australia.
Various research sources place the national vacancy rate below 1%, the lowest ever recorded and indicative of a rental shortage crisis which has been building for several years.
We are now seeing rental growth in the major cities at levels similar to the price growth that occurred in 2021.
With prices no longer rising at those levels in the major cities, rents have taken over as the headline statistics of the housing market.
Big Property Deals Keep Coming
Fewer properties may have sold in 2022 but that hasn’t stopped plenty of big-ticket transactions going ahead.
The latest Best of the Best report shows there were 535,000 property sales in the past 12 months.
CoreLogic head of research Eliza Owen says that compares to the 620,000 properties sold during the first year of the pandemic.
She says there were many high-end sales in the past year with the top ten sales totalling $386.3 million, with seven of those sales in New South Wales.
The most expensive sale in Australia during the year was in Wentworth Road, Vaucluse, with a house selling for $62.75 million in February.
Other sales to make the top ten were a home in Orrong Road, Toorak, which sold for $38.5 million; a property in Arakoon Crescent, Sunshine Beach, which sold for $28.5 million; and another in Noosa Parade which sold for $27 million.
Bingara in the New England region of NSW recorded the highest growth for houses nationally of 36.2%.
Investor Pause Maintains Crisis
With Australian Bureau of Statistics figures showing lending to property investors is down by 15.3%, it is unlikely there will be dramatic changes to the current rental crisis any time soon.
It appears high rents have not been enough to encourage investors back in big numbers, after many sold out of the market to take advantage of big capital gains during the pandemic buying spree.
Research by investor advocacy groups, including Property Investment Professionals of Australia, has shown that many are nervous about re-entering the market because of increasing government regulation around tenants’ rights.
Rising interest rates may also have had an impact on the borrowing capacity of investors, but aside from these concerns all the stars should be aligning for investors. Rents are continuing to rise, vacancy rates remain at historic lows and prices are lower in some markets.
Demand for property is also expected to increase substantially within the next year as Australia lifts its levels of overseas migration and foreign students return.
Prices To Grow In New Year
Property prices are predicted to grow again in 2023, with signs the current decline in the biggest cities is already slowing.
CoreLogic head of research Eliza Owen believes the market overall may have already moved past the peak of price drops in the big cities.
“As we move into 2023, there continues to be a mix of headwinds and tailwinds for housing market performance,” Owen says.
“With expectations that the bulk of the rate-tightening cycle occurred in 2022, housing value declines could find a floor in the New Year.”
CoreLogic economist Kaytlin Ezzy says it’s unlikely markets will fall below the levels recorded at the beginning of Covid, while some locations have continued to deliver good growth in 2022.
“Adelaide suburbs dominated the list for strongest annual appreciation in value across both property types, with house values across Davoren Park rising by 34.7% and unit values in Seacliff Park 41.4% above the levels recorded this time last year,” Ezzy says.