PIPA Quarterly National Market Update – April Quarter 2023

Apr 2023Karen Millers

Since the start of 2023, there has been more activity from educated buyers and investors who may have realised that waiting it out on the sidelines is not going to improve their portfolios anytime soon.

This was according to the latest PIPA National Market Update, which pulls together insights and analysis from seven market experts and PIPA members from the latest edition of the PIPA Adviser e-magazine’s national market update.

Nicola McDougall (pictured above), PIPA chair, said property prices appear to be stabilising, due in part to the low volume of stock for sale. McDougall also noted that a CoreLogic report had revealed a more positive trend in housing values alongside a persistently lower-than-normal flow of new listings coming on the market.

“The 10 consecutive rises have added an eye-watering 3.5 percentage points to the cash rate, which has pushed interest rates into 5% to 6% range – a level many borrowers may never have experienced,” she said. “With inflation also appearing to have peaked, there are certainly plenty of signs that we are heading for more positive property conditions in the months ahead.”

New South Wales

Rich Harvey, CEO and founder of Property Buyer, said the NSW property market is showing a “mixed bag of results,” with most areas only receding around 12% to 15% despite the 10 consecutive rate hikes reducing borrowing capacity by 30%.

“The Sydney property market has shown strong resilience, and over the last two months has shown a significant turnaround,” Harvey said. “During February, Sydney dwelling values rose by 0.3%, and in March increased 1.4%. Compared to 12 months ago, Sydney housing values are now 12.1% lower according to the latest CoreLogic data.

“We have seen a dramatic slowdown in price deceleration, and we have now reached a point of inflexion. Some say we have reached the bottom of the market while others say there could [be] a few more percent to drop.”

He said there has been a resurgence in buyer numbers since February, with a number of different buyer groups, including first-home buyers, upgraders, and prestige buyers, making up the “enthusiastic” pool of people searching for property.

“The main factors that are driving the market at the moment is the lack of available stock – listing volumes down 25% or more in some areas – and the significant increase in migration and population growth,” Harvey said.

“Rental prices have shot through the roof which is motivating some renters to consider buying a property to get out of the perpetual rental cycle. Vacancy rates are at record lows. It’s inevitable that rental prices will continue to rise over the coming year due to the chronic shortage of housing.

“I expect rents to rise around another 10% to 12% this year. Increasing yields is also attracting investors back into the market – but only if they can afford a loan as higher interest rates begin to bite.

“As swathes of borrowers come off fixed right mortgages, there may be some more motivated sellers coming on the market if they perceive that they cannot continue to afford to hold their properties. This could provide some opportunities in the second half of 2023 for savvy buyers that are in a position to continue growing their portfolios.”

Victoria

Cate Bakos, buyers’ agent and QPIA at Cate Bakos Property, said the Melbourne market can be described as a “two-speed market” with heightened competition on quality properties and languishing listings for compromised listings.

“February’s overall capital growth movement of -0.4% certainly signals a slowing of price falls, easily attributable to low listing numbers,” Bakos said.

“Buyers remain disinterested in renovation and/or development projects and today’s buyers are applying high scrutiny to each listing in the quest to buy well. However, it’s becoming abundantly clear to these buyers that a low level of listings in the renovated house segment is underpinning the market firmly and contributing to price increases.”

Bakos said there were many buyers who were still sitting it out, waiting for the bottoming of the market, while there were also those still looking to buy despite diminishing borrowing capacity.

Bakos said “the dramatic impact of tight vacancy rates is hurting renters in Melbourne.” The city posted an overall annual rental growth figure of 10.1%, which was in line with national rental growth, but its unit market has dramatically uplifted.

“As bosses request their employees return to either full time or hybrid office work, our demand is skyrocketing for units in Melbourne,” Bakos said. “The recent influx of Chinese students ordered to return to in-person study by the Chinese government is exacerbating the already challenging conditions that renters are facing.

“Lower new building starts, heightened interest costs for prospective investors, and challenging rental reforms are keeping rental stock levels subdued and amplifying these horrid conditions for renters.”

In terms of price declines, the regions of Victoria were performing reasonably in step with its capital city. But unlike Melbourne, regions have maintained strong net gains from the pandemic rush.

“While work from home (even in a hybrid capacity) exists, local agents are reporting that those who moved to the regions are still content to stay,” Bakos said.

Queensland

Edward Reavy, QPIA and founder and director of EKR Property, said the Queensland housing market is facing increased pressure, as the state starts to see a second wave of interstate migration, due to cost-of-living pressures.

“With recent interest rate hikes, the borrowing capacity of the average buyer has reduced considerably, and the price bracket they could previously afford to buy into is no longer attainable,” Reavy said.

“However, comparably in Queensland, they can buy a far superior home in a prominent location within their borrowing budget. This demand is growing momentum which will help fuel home prices and drive the rental market in the sunshine state.

“For those local buyers who cannot afford a house anymore, the local townhouse and unit market will benefit.”

He noted that demand for property continues to outstrip supply in Queensland, which will help keep Queensland house prices from falling off a cliff and further fuel higher rents.

“Some South-East Queenslanders that are retiring or seeking a slower pace of life as the masses move to this region are selling up and moving further north to more affordable and quieter regions.

“Towns such as Hervey Bay, Bundaberg, Rockhampton, Mackay, Townsville, and Cairns are benefiting from infrastructure spending and employment opportunities, attracting people, and putting pressure on the local housing and rental markets in those regions.”

Reavy said Queensland’s attraction as “the strongest economy in Australia, its affordability and lifestyle, the infrastructure spending, and job opportunities will result in owner-occupiers and investors rushing back to the market” once interest rates stabilise.

South Australia

Peter Koulizos, programs director and master of property at the University of Adelaide, said the Adelaide and South Australian property “continue to go from strength to strength, relative to the rest of the nation.”

“Despite a 1.5% decrease in property prices over the past quarter as illustrated by the CoreLogic Daily Home Value Index, Adelaide property prices are 5.1% higher today than they were 12 months ago. This is the best performance of all the capital cities,” Koulizos said.

The increase in rents has been considerable, with rents rising 12.6% in the past 12 months – the second highest increase in rents, just behind Brisbane’s increase of 13.1%.

He said supply and demand were two main reasons behind this performance.

CoreLogic data showed that Adelaide has 12% fewer listings of properties for sale than 12 months ago – the largest decrease in total listings of all capital cities and regional areas in South Australia.

“In relation to the rental market, Adelaide’s vacancy rate is the lowest of all capital cities,” Koulizos said. “A low vacancy rate is a combination of a low supply of rental properties and relatively high demand. Why is there such high demand for rental properties in Adelaide?

“The demand for rental properties has increased since the onset of COVID-19. South Australia dealt very well with COVID-19, as evidenced by the relatively low number of days the state was in lockdown. This caught the attention of others, especially those living in larger capital cities, who decided to move to Adelaide and South Australian regional areas.”

With the worst of COVID-19 now over, Koulizos said Adelaide is attracting “more than its fair share of overseas migrants and international students” since international borders have opened, “due to its status as a regional area, which makes it easier for overseas migrants to gain permanent residency, and its affordability relative to other major capital cities.”

Western Australia

Damian Collins, managing director of Momentum Wealth, said Western Australia remained relatively affordable due its low housing prices, strong income, and labour market.

Unlike most of Australia, the Perth residential property market has experienced growth, rising 2.4% over the 12 months to February 2023, according to CoreLogic data.

REIWA figures showed that the number of properties listed for sale has remained below 8,000 since the start of 2023 – far below the typical balanced market range of 13,000 to 14,000 listings – while rental listings have dropped from 11,000 in 2016 to being consistently under 2,000 since August 2022. A balanced market in WA typically sees around 6,000 rental listings.

“The restrictions in the construction market have caused dwelling approvals to fall to the lowest levels in nearly 40 years,” Collins said. “There is a significant undersupply of residential houses and rentals within the Perth market, which is expected to tighten as supply is unable to keep up with the growing demand of a rising population.”

Tasmania

Simon Pressley, head of research at Propertyology, said the fourth quarter has produced a mild reduction in asset values in most locations across the state, following an incredible first half of 2022 and despite all key underlying fundamentals remaining as strong as they’ve ever been.

“Tasmania recently broke an all-time record for job participation, the economic outlook continues to be outstanding, household wages are up, household equity is through the roof, the tourism industry is rocking it, and rental vacancy rates across the state remain locked in at less than 1%.

“Ordinarily, these are conditions for a spectacular property boom. Ordinarily, that collection of characteristics creates significant confidence for real estate buyers.”

Pressley said analysis of different sets of data revealed the current softening in the market was caused by “buyer fatigue.”

“The state, especially Hobart, has enjoyed one of the longest growth cycles that any Australian city has ever seen. So, it is possible that buyers are now catching their breaths,” he said.

“The timing of the market softening correlates with the start of this interest rate cycle in May 2022. During Hobart’s eight-year cycle that produced 130% capital growth, quarterly sales volumes hovered between 750 and 850, whereas Q4 2022 saw a reduction to 690 transactions.

“The volume of properties added to the sales market each month remains at normal levels, so there’s no evidence of distressed sales or excess housing supply. Oversupply is not an issue, but what is listed for sale is taking longer to shift.

“The current total volume of resale supply listings is on par with the same time five years ago when Hobart’s total population was 11% less and its property market was booming.”

Originally Published: Mina Martin | Australian Broker | 28 April 2023

https://www.brokernews.com.au/news/breaking-news/pipa-releases-national-market-update-282374.aspx

Are you watching the clock

Apr 24

Is now the right time?” It’s a commonly asked question by both buyers and sellers in the property game, and while real estate experts often caution against trying to time the market, there are several factors that can help you decide if the market is ripe for buying or selling.

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