Key takeaways
Early this year the Australian housing market turned the corner despite challenges such as high inflation, rising interest rates, recession fears, and low consumer confidence.
The combined value of residential real estate in Australia rose to $9.8 trillion at the end of June, up from from $9.6 trillion in the previous month and $9.5 trillion the month before.
Despite a recent bounceback, home values are -5.3% lower year-on-year.
The combined capital cities dwelling market value rose 1.2% in June, easing from a 1.4% lift in May.
Values across the combined capital cities arising it more than twice the pace of combined regional markets which saw venues increase by 0.5% in June.
The lowest change in values was across Hobart, where home values declined -12.7% in the past year.
Sales volumes are stabilizing, despite being down from recent highs in 2021, with dwelling sales -20.3% lower year on year.
Want to know what’s happening to the housing markets around Australia?
Well, this monthly collection of charts from CoreLogic paints an interesting picture.
Our property markets clearly turned the corner earlier this year, having now moved to the upturn phase of the property cycle.
Despite 12 interest rate increases from the Reserve Bank of Australia, which have seen official rates rise by 4 per cent over the last year, property prices have kept rising, and the RBA’s pause in hiking rates in the month of July will only fuel our housing markets further.
However inflation is still a problem and Australia’s economy is still growing too strongly for the RBA’s liking, meaning the road ahead will not be without bumps.
While overall consumer confidence has taken a significant hit, home buyer confidence has improved, yet sellers have gone on strike not delivering sufficient properties to the market for sale.
Residential real estate underpins Australia’s wealth
- The total value of Australian residential real estate was $9.8 trillion at the end of June 2023. This has been increasing month after month, but I still remember when this figure was closer to $10 trillion earlier last year.
- However, outstanding mortgages against all residential housing are only $2.2 trillion – a very comfortable 22% Loan to Value ratio.
- 56.3% of total Aussie household wealth is held in residential property – one of the many reasons neither the banks, the government nor the RBA wants a property crash.
Dwelling values continue to rise in June
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National home values rose 2.8% in the June quarter, which is the highest quarterly movement since January 2022.
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On a monthly basis, the pace of growth eased from 1.2% in May to 1.1% in June.
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The positive trend in capital city home sales is a symptom of persistently low levels of available housing supply running up against rising housing demand. Buyers are becoming more competitive and there’s an element of FOMO creeping into the market.
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However, our property markets are fragmented and while most segments growing, some are still languishing.
- The combined capital cities dwelling market value rose 1.2% in June, easing from a 1.4% lift in May. Values across the combined capitals are rising at more than twice the pace of the combined regional market, which saw values increase by 0.5% in June.
- Dwelling values in Australia are -5.3% lower over the past 12 months.
- Combined regional property markets rose 1.1% over three months to June, and were down -6.5% over the last year.
- The highest annual growth rate in dwelling values among the regional and capital city dwelling markets was across Regional SA, at 8.7%%.
- The lowest change in values was across Hobart where home values declined -12.7% in the past year.
Our capital city markets are fragmented
But, as mentioned previously, within each state, our housing markets are fragmented, and the more expensive sectors of the market which led to the downturn are leading the upturn.
This is nothing new… the upper quartile of our housing markets has always been more volatile.
Each State is running its own race
- On the one hand, Perth property values are up 2.5% over the year and are now at a record high.
- On the other hand, Brisbane property values, which were one of the strongest markets during the recent property boom, increased 1.3% in the month of June but are still -8.2% below the record high, which was in June 2022.
- And in the previous darling of the housing markets – Hobart – house prices are -12.9% below their record highs recorded in May 2022.
Sales volumes are trending closer to a historic monthly five-year average of around 40,000
- CoreLogic estimates there were 35,523 sales in June nationally.
- The six-month moving trend suggests sales volumes are stabilizing, despite being down from recent highs in 2021.
- The number of sales is down -20.3% over the year.
We’ve moved into a seller’s market
- While we’re clearly in a seller’s market the amount of time it takes to sell property trended slightly higher through the June quarter nationally, with the median days on the market sitting at 34 days, up from a recent low of 30 days in the three months to April.
- Properties are taking notably longer to sell in regional Australia, with median days on the market up to 47 in the three months to June.
- At the median level, vendors are now offering less of a discount on their property.
- The median vendor discount nationally was -4.0% in the June quarter, up from -4.2% in the March quarter.
- Across the combined capitals, the median vendor discounting rate is at its lowest since the three months to May 2022 (-3.6%).
Here’s how many properties are for sale at the moment
- As the following chart shows, in the four weeks to July 2nd 2023, new listings remain low.
- With 32,568 newly advertised properties added for sale, new listings have seen a slight uptick, which is unusual for this time of the year.
- New listings volumes remain low relative to previous years, -7.9% lower than its 5-year average.
- At the national level, there were 130,950 listings observed over the four weeks to 2 July 2023. Total listings are trending lower than the previous five-year average due to the relatively low volume of new listings, against a normalising in sales volumes.
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Vendors are a little nervous and discretionary sellers are sitting on the sidelines, but there are still plenty of properties available for sale. The problem is that very few are A Grade homes or investment grade properties. Owners of quality properties are holding onto them.
Auction clearance rates confirm the turn in the property cycle
- The combined capital cities clearance eased slightly through the month, averaging 67.7% in the four weeks ending 2 July 2023, according to CoreLogic.
- We update the weekly auction clearance results here each week.
We’re experiencing a rental market crisis in Australia
- Australian rent values increased a further 0.7% in June, taking the national annual increase to 9.7%.
- Annual growth in rent values remains elevated on the decade average (which was 3.0% per year), but has shown signs of easing after peaking at 10.2% over the 2022 calendar year.
Finance and Lending
- The combined value of secured housing finance increased 4.8% in May to almost $25 billion.
- Both owner-occupiers and investors are seeing an uplift in borrowing from a recent low in February, which coincides with
the trough in national home values. - Nationally, investor finance comprised 34.2% of new mortgage lending through May. This rose from 33.7% in the previous month, as monthly growth in investment lending slightly outpaced the increase in owner-occupier lending.
- The value of first home buyer finance rose 5.5% through May, following a slight easing in April. First home buyer finance accounted for 25.4% of owner-occupier finance in the month, which is above the decade average of 23.8%.
- Housing finance is a “leading indicator” of what’s ahead for our property markets – and increased loan approvals mean more property purchases moving forward.
Source of charts: CoreLogic Chart Pack, July 2023.
