The outlook for Greater Shepparton continues to go from strength to strength
Australia’s housing market reached a turning point during the first quarter of 2023, with house prices in the combined capitals increasing for the first time in a year. Despite the rise, current market conditions are more balanced between buyers and sellers, as the current pace of quarterly growth of 0.4% across the combined capitals is moderate compared to the historical average of 2.6%. The crucial shift in market conditions is being led by our larger capital cities – particularly Sydney, growing for the first time in a year. In Sydney, Adelaide and Perth, house prices increased, while they remained stable in Melbourne and Brisbane. However, weaker conditions were apparent in the smaller capital cities, as price falls accelerated in Canberra and Darwin (they also fell in Hobart). It is clear that Australia’s housing market has now fully reverted to a multi-speed market as it was pre-pandemic. It is also likely that our large capitals will lead the way into recovery as they have historically, given they hit a peak price earlier and fell faster.
While the cash rate remains at an 11-year high placing a significant dent in borrowing capacity and escalating the cost of debt. The recent pause to interest rate hikes could be the sentiment changer needed for Australia’s housing market. Not only does it provide a more stable environment it suggests interest rates are at, or close, to a peak. Buyers have adjusted to this new norm of higher costs of debt and, as we reach the peak cash rate, it will provide them with a better understanding of borrowing capacity. While the potential for further rate rises remains, inflation is slowing quicker than initially expected. This could have a positive sentiment flow-on to consumers and the push needed for buyers and sellers to return to the housing market.
High interest rates and tight serviceability requirements place borrowers in a challenging position to qualify for a loan and remain a risk to the housing market. However, as prices lift in certain areas, it’s a timely reminder that interest rates are not the only factor influencing housing activity and prices – multiple factors are at play. Population growth is rebounding faster than anticipated, with record levels of overseas migration. Domain analysis found population growth has a cumulative longer-term effect on house prices and, therefore, will continue to play a driving role in our housing markets into 2024. Together with extremely tight rental markets, it makes purchasing more attractive and may shift some to buy, given the current challenges of securing a lease.
One of the backbones underpinning pricing has been the unseasonally weak flow of new listings since September 2022, still 6.3% below the five-year average for the combined capitals. The pullback from sellers has been greater than from buyers, resulting in total homes for sale edging 14.6% below the five-year average for the combined capitals. Total supply is also lower over the past year in Sydney, Melbourne, Brisbane, Perth and Adelaide. This signals rising competition between buyers helping to stabilise or improve prices in certain markets. As housing confidence improves, these delayed decisions present another future risk that could spark further price falls.
