Mr Lowe from The Reserve Bank of Australia (RBA) said that property prices in Australia went up by 25% over the past 2 years. He said “It would not surprise me — and this is not a forecast — it would not surprise me if prices came down by a cumulative 10 per cent. And, even if they did that, they’re still up 15 per cent over three years. “
As at October 2022, prices are nationally down nearly 5 per cent from their most recent peak as reported by ABC News.
Property Council of Australia chief executive Ken Morrison said that traditionally interest rate hikes had a cooling effect on the housing market.
What is driving the decline, according to mortgage broker Mr Ali Kawser, is the effect of higher interest rates on the amount prospective buyers are allowed to borrow.
The RBA said that most households should be able to weather the interest rate hikes, however, has acknowledged that ultimately its rapid interest rate hikes could see some households with mortgages falling into arrears, forcing some to sell their homes or to enter foreclosure.
A snap shot of the housing trends across the capital cities show that not all the nation’s property markets are being impacted equally. According to Westpac Property Market update, powered by CoreLogic:
- Sydney has recorded the sharpest drop in home sales across the capital cities, with estimated sales through the September quarter down -31% compared with a year ago.
- In Melbourne home sales through the September quarter were estimated to be -2.9% lower relative to last year, when further lock downs were experienced.
- In Brisbane, after recording one of the most significant upswings across the capitals, home sales are also trending lower, with estimates for the September quarter indicating a -19% drop in sales relative to the same period a year ago.
- Adelaide home sales are holding up better than most cities, with the number of home sales through the September quarter estimated to be 18.5% higher than a year ago.
- Perth Home sales are holding up, with estimates for the September quarter indicating buying activity was 5% higher than a year ago.
In Perth and Adelaide, the demand has not been impacted by lower borrowing capacity amid higher interest rates, because of lower median housing values relative to most of the larger capital cities along with a persistently low level of available supply.
In parts of Queensland, demand also continues to outstrip supply according to Ken Morrison, chief executive of the Property Council. He said the COVID-19 pandemic saw an influx of home owners from southern states to south-east Queensland.
CoreLogic research director Tim Lawless said rapid interstate migration was the main driver behind the strong demand for housing in south-east Queensland.
According to Michael Yardney from Property Update it is likely that the northern migration will continue into 2022 driven by Queensland’s more affordable housing and perceived lifestyle benefits. This, in addition to overseas migration, employment growth, long-term benefits of hosting the Olympics and the extra infrastructure building, means Queensland housing market is looking particularly positive.
Michael Yardney predicts that while affordability constraints will limit property price growth in Sydney and Melbourne, the smaller capital cities, including Queensland, are still likely to perform strongly.
Takeaways from the Westpac report, powered by Corelogic:
Buyers
Stock levels have normalised across the more expensive capital city markets, providing more choice and a better negotiation position. More broadly, the opportunity presented by lower housing prices and less competition is likely to become more attractive to buyers as the housing market downturn progresses.
Sellers
Conditions have become more challenging amid less demand which means pricing expectations will need to be realistic. Vendors may need to be willing to negotiate on price and ensure they have a quality marketing campaign behind the property.