Australia’s housing market continues to defy expectations. Despite further interest rate hikes, property values have risen for two consecutive months. Until supply responds to demand, the upturn seems likely to continue.
Over 400 business leaders joined our recent property update webinar, where Macquarie Bank’s National Head of Residential Real Estate, Dominic Thompson, and CoreLogic’s Head of Residential Research, Eliza Owen, discussed the surprising upswing in Australia’s housing market.
Here are the five key insights from their conversation.
1. Demand is offsetting rate rises
Capital city home values rose 1.4% in the three months to April – the first quarterly lift since May last year. This disrupts the very short, very sharp, peak to trough decline of 9.7% that ran until February. Such a correction is only surpassed by the much slower 10.2% fall recorded between 2017 and 2019.
“It’s interesting to see the quick succession of these last two downturns,” Thompson observed. “The question is, how sustainable is the trend for property prices to rise at the same time as cash rates?”
While the cash rate can be a good short-term indicator of price growth, other factors – including population growth and supply of dwellings to market – can have a larger impact over time.
“A good comparison might be the early to mid-2000s, when we saw a surge in overseas migration and structural economic growth as a result of the mining boom,” explained Owen. “Even though rates were also rising during this period, we saw higher home values and I think that’s what we’re seeing now.”
Clearance rates, which reflect the percentage of homes sold at auction, have also improved. Nationally, the clearance rate has held at 65% over the four weeks to May 10, compared with 55% at the end of 2022.
“We’re seeing properties take less time to sell, and a bounce back in ABS housing finance data,” Owen added. Home lending increased across all buyer groups in the first quarter of 2023 but, most notably, grew 7.3% among first home buyers.