Australia Sees Sudden Turnaround in Property Prices

BY Realty Plus

A stronger than expected lift in demand over the past two months is nudging property prices higher and delivering the highest auction clearance rates in more than a year. If the price rises are maintained for the rest of the year, home values will end up about 4% higher in 2023, defying earlier predictions of sharp falls of 10% or more for this year.

“Economists are shredding their previous price forecasts,” said Sally Tindall, Research Director for RateCity. “There’s been a significant turnaround.” The prediction followed another week of rising auction clearance rates. Preliminary clearance levels were 75.3%, the highest in 15 months, in the third consecutive week above 70% before revisions.

All of a sudden there’s a house could prefab be the future of Australian homes. The buoyant demand came despite the Reserve Bank surprising most economists at the start of May with another interest rate rise, the 11th since last May.

Surging population growth and expectations that the RBA may only have one more hike to come have underpinned the rebound in real estate. Also supporting prices and clearance rates is a decline in property listings. As of April, there were 138,144 listings across Australia, near decade lows and down more than a third from the average for the month, CoreLogic said. But past figures indicate that for each 1% increase in property prices, listings rise 0.5%, so listings could soon rise given the price increases.

“There is still some uncertainty around the trajectory for the cash rate, particularly given the latest monetary policy announcement showing a tightening bias from the Reserve Bank,” said Eliza Owen, CoreLogic’s head of research. There are other uncertainties, including how many properties come on to the market because their owners are unable or unwilling to keep paying off the debt. Prices are defying gravity at the moment, adding that anecdotal evidence suggested some investors were opting to offload their properties. But the banks aren’t seeing huge amounts of mortgage distress either.

The recent rebound in prices can’t be taken for granted. For one thing, while some people will have received a pay rise, most pay packets aren’t keeping up with inflation. Auctions in Australia’s major cities will near 2,000 this week, or about 18% more than this time last year. Housing prices gain pace as auction listings increase across Australia’s capital cities. 

People who don’t have a job find it difficult to pay their mortgage, especially if they have run down any savings buffer they might have built up during the pandemic. Banks typically require borrowers to be able to afford their debt repayments even if they were charged three percentage points higher than the rate they applied for. That curb, though, held back some borrowers from being able to take advantage of market competition to refinance.

Tags : demand property prices highest auction rates prices year home values economists Sally Tindall Research Director RateCity population growth monetary policy properties