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Key takeaways
We’re almost at the end of the year and property prices have kept rising for almost 11 months in a row despite 13 interest rate rises, high inflation and reduced borrowing capacity.
The peak-to-trough change in Australian house prices in 2022 was 9 per cent according to Corelogic, and only 4 per cent according to PropTrack, which is confusing those analysts who were looking for prices to drop further this year on the back of interest rate increases.
But now it is clear that our property markets bottomed in January 2023 and we have moved into the next phase and our combined capital cities have increased in value by 8.0% in the year to date. That’s very different to the pessimistic forecasts made by the RBA and many of the bank economists only 12 months ago of double digit price falls.
And it’s likely property prices and rents are going to keep increasing, but more slowly for the remainder of the year and into next year.
With the pipeline of new listings now diminishing as the year ends at a time when many buyers are keen to complete their transaction before the holiday break, it’s not likely that the latest interest rate rise will stall the market.
Sydney property prices remained flat over the last week and increased 0.1% over the last month and are up 11.3% year to date, and are 10.9% higher than they were 12 months ago.
Melbourne property prices dropped -0.2% over the last week, also dropped -0.3% over the last month but are up 3.8% year to date, and also 3.4% higher than they were 12 months ago.
Brisbane property prices increased by 0.2% over the last week, increased 1.1% over the last month and are up 12.6% year to date, and also 12.3% higher than they were 12 months ago.
Overall, Australian capital dwelling prices increased by 0.4% over the last month and are now 9.4% higher than they were 12 months ago.
This new property cycle has been driven by an undersupply of good properties relative to current demand, but market momentum is now slowing.
Australia’s housing market continues to defy expectations!
Despite 13 interest rate increases from the Reserve Bank of Australia, which have seen official rates rise by 4.25 per cent over the 18 months, property prices have now been on the rise since early 2023.
With the pipeline of new listings now diminishing as the year ends at a time when many buyers are keen to complete their transaction before the holiday break, it’s not likely that the latest interest rate rise will stall the market.
It seems that even the most pessimistic forecasters have had to change their minds and accept that most capital city markets will enjoy double digit capital growth this year, but some of the property bears have come back out of their caves and are predicting values to fall in 2024.
While capital growth is likely to be much more subdued in 2024, our 5 major capital cities should still see price growth next year, while Hobart, Canberra and Darwin may see prices fall a little in 2024
The underlying reason for continued property price growth will be that the demand to buy homes will continue to exceed supply, but moving forward our markets will be fragmented with a flight to quality properties.
It will be much the same for our rental market where the supply / demand equation is so far out of balance that we’ve experienced an unprecedented rental crisis with historically low vacancy rates and skyrocketing rents and this will continue into 2024.
On the auction front, the last week of the spring/early summer auction season saw capital city auction numbers fall -4.1%, with 2,918 homes auctioned across the combined capitals.
Although down from the 3,042 auctions held the week prior, last week’s auction numbers were still relatively high, with 25.8% more auctions than this time last year (2,320) — a clear demonstration that vendors have been much more active this spring.
Despite the resilience in auction activity, buyers have become warier, with the combined capital preliminary clearance rate slipping a further 10 basis points last week to 66.8%.
With the previous week’s early rate (66.9%) revising below the 60% mark at the final number (57.6%), it’s likely last week’s final results will similarly come in well below the average final clearance rate recorded throughout winter and spring (65.8%).
See Corelogic’s full auction report below.
Corelogic reports that:
- Sydney property prices remained flat over the last week and increased 0.1% over the last month and are up 11.3% year to date, and are 10.9% higher than they were 12 months ago.
- Melbourne property prices dropped -0.2% over the last week, also dropped -0.3% over the last month but are up 3.8% year to date, and also 3.4% higher than they were 12 months ago.
- Brisbane property prices increased by 0.2% over the last week, increased 1.1% over the last month and are up 12.6% year to date, and also 12.3% higher than they were 12 months ago.
Overall, Australian capital dwelling prices increased by 0.4% over the last month and are now 9.4% higher than they were 12 months ago.
Clearly, we are in the early stages of a new property cycle driven by an undersupply of good properties relative to increasing demand.
Source: CoreLogic December 18th 2023
Of course, these are “overall” figures – there is not one Sydney or Melbourne or Brisbane property market.
And various segments of each market are performing differently.
In 2022 price declines had been led by the top end of our housing markets, and while these turned around to be the strongest sectors of our markets early this year, particularly in Sydney, now median price properties are increasing in value strongly.
To help keep you up-to-date with all that’s happening in property, here is my updated weekly analysis of data and charts as of 27th November 2023 provided by CoreLogic, and realestate.com.au.
Property asking prices.
Property asking prices are a useful leading indicator for housing markets – giving a good indication of what’s ahead.
Source: SQM Research.
The value of property asking prices as a leading indicator for housing markets is quite significant.
In fact it’s more valuable than median prices which can be quite misleading.
Let’s delve into why this is the case and how it impacts the real estate market.
- Early Market Sentiment Indicator: Asking prices often reflect the current sentiment of sellers in the real estate market.
If sellers are confident, they might set higher asking prices, anticipating strong demand.
Conversely, if sellers are uncertain or perceive a market downturn, they might lower their asking prices to attract buyers.
This makes asking prices a real-time indicator of market sentiment, often preceding changes in actual sales prices. - Predictive of Future Price Trends: Trends in asking prices can be predictive of where the actual property prices are headed.
For example, a consistent rise in asking prices over a period can signal an upcoming rise in transaction prices. - Impact of Economic Factors: Economic factors such as interest rates, employment rates, and broader economic health influence asking prices.
For instance, changes in the Reserve Bank of Australia’s policies or shifts in the job market can quickly reflect in the asking prices, providing insights into how these factors are influencing the housing market. - Regional Variations: In a diverse market like Australia’s, asking prices can also provide insights into regional disparities.
For instance, the property markets in Melbourne and Sydney might behave differently from those in Brisbane or Perth. Asking prices can give early indications of these regional trends. - Influence of Supply and Demand: Asking prices are also a response to the balance of supply and demand in the market.
In areas with limited supply and high demand, asking prices tend to be higher and vice versa.
However, it’s important to note that while asking prices are a valuable indicator, they should not be used in isolation.
Other factors like actual sales prices, time on market, auction clearance rates, and economic conditions also play crucial roles in understanding the property market dynamics.
Last weekend’s auction report.
Auction activity falls -4.1% in the final auction week of the year
The last week of the spring/early summer auction season saw capital city auction numbers fall -4.1%, with 2,918 homes auctioned across the combined capitals.
Although down from the 3,042 auctions held the week prior, last week’s auction numbers were still relatively high, with 25.8% more auctions than this time last year (2,320) — a clear demonstration that vendors have been much more active this spring.
Despite the resilience in auction activity, buyers have become warier, with the combined capital preliminary clearance rate slipping a further 10 basis points last week to 66.8%.
With the previous week’s early rate (66.9%) revising below the 60% mark at the final number (57.6%), it’s likely last week’s final results will similarly come in well below the average final clearance rate recorded throughout winter and spring (65.8%).
This week last year, 51.9% of auctions held across the combined capitals were successful.
Sydney saw auction numbers slip below the 1,000 mark for the first time in eight weeks, with 958 homes auctioned.
Compared to the previous week (1,072), last week’s levels were down -10.6% but were 21.6% higher than this time last year (788).
With 666 results collected so far, Sydney’s preliminary clearance rate came in at 65.5%, the lowest preliminary rate of the year.
The previous week’s preliminary rate of 66.3% was revised to the lowest final clearance rate of the year at 57.0%, while this time last year, 53.2% of auctions reported a successful result.
Melbourne hosted 1,401 auctions last week, down from 1,415 the previous week but up from the 1,045 seen this time last year.
With 66.9% of the 995 results collected so far returning a successful result, Melbourne recorded its highest preliminary clearance rate in four weeks.
The previous week’s preliminary rate of 66.1% was 80 basis points lower and revised to the city’s lowest final rate (56.2%) since Easter (50.9%).
Despite steadily rising over the last three weeks, Melbourne’s preliminary rate remained well below the average level recorded through spring (68.1%) but above the final rate recorded this time last year (53.4%).
Adelaide (199) finished the year with a bang, hosting just shy of 200 homes auctioned in the city’s busiest auction week of the year.
The high volume of auctions was accompanied by a 1.0 percentage point rise in Adelaide’s preliminary clearance rate, with 81.7% of auctions reporting a successful result.
Canberra also recorded a rise in both auction numbers (6.7%) and preliminary clearance rate (+5.1 percentage points), with 65.9% of the 143 auctions held returning positive results.
In contrast, Brisbane hosted 186 auctions and recorded an early success rate of 56.3%, down -13.5% and -11.4 percentage points week-on-week, respectively.
In Perth, seven of the nine results collected so far were successful, while three of the four auctions held in Tasmania last week returned successful results.
The end of the spring and early summer selling auction season has seen buyers benefit from more choice, less urgency and greater leverage at the negotiation table amid higher advertised supply levels.
While auction numbers will remain subdued through December and early January, the trend through the final month of the year, characterised by increasingly diverse conditions from city to city helps set the scene for 2024
| City | Clearance rate | Total auctions | CoreLogic auction results | Cleared auctions | Uncleared auctions |
| Sydney | 65.5% | 958 | 666 | 436 | 230 |
| Melbourne | 66.9% | 1,401 | 995 | 666 | 329 |
| Brisbane | 56.3% | 186 | 103 | 58 | 45 |
| Adelaide | 81.7% | 199 | 109 | 89 | 20 |
| Perth | n.a. | 27 | 9 | 7 | 2 |
| Tasmania | n.a. | 4 | 4 | 3 | 1 |
| Canberra | 65.9% | 143 | 85 | 56 | 29 |
| Weighted Average | 66.8% | 2,918 | 1,971 | 1,315 | 656 |
Source: CoreLogic
Our Rental Markets
Our rental markets have been tightening further over the last few months, with vacancy rates for both houses and apartments extremely low across the country and asking rents rising rapidly.
Asking rents across the capital cities for houses had been rising in annual terms in the “double digits”, while for units, new asking rents are rising at faster rates, at over 20% in Sydney, Melbourne and Brisbane.
The recently released National Accounts showed that Australia’s population has grown by around 620,000 people in the past financial year.
That’s the highest number in history and a hundred thousand more than what the May federal budget projected.
This record 2.8% expansion in the 15 plus age group of our population is placing a great strain on our rental markets.
The number of overseas students and also people on graduate visas in Australia has increased by just over three hundred thousand in the last financial year.
In particular rents have been rebounding across inner-city rental markets (popular with international students) after slumping during the pandemic when international borders were closed.
While the pace of rental growth is likely to slow down, with current vacancy rates rents will continue to increase as there is a minimal new supply of properties set to enter the market in the medium-term future.
Sellers of good properties are on strike
With the Spring selling season almost over for 2023, fewer sellers are putting their properties on the market, meaning there is an acute shortage of A grade homes and investment grade properties for sale at present.
Source: Corelogic December 2023
The charts below show the lack of property listings available for serious buyers at present, and with home buyers back in the market well located properties are being snapped up quickly.
But not all properties are selling well- there is currently a flight to quality.
Property listings for sale provide a useful real-time indicator of seller sentiment and general market confidence.
However, this year sellers have erred on the side of caution before listing with the flow of new listings consistently below average since spring last year.
Source: CoreLogic December 2023
Vendor Metrics
As the following chart shows, houses are still being snapped up quickly by eager buyers.
READ MORE: The latest median property prices in Australia’s major cities
At a national level, properties are taking slightly longer to sell than they were during the property boom of 2020 and 2021.
However the number of days to sell a property is still relatively low (a sign of the tight supply situation for good properties), and vendor discounting is still at very low levels.
In general, houses are selling quicker than apartments, but the shortage of good properties on the market is seeing A-grade properties selling quickly with minimal discounting.
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