26th September 2022 / Jeremy Desmier: Market Update | 24 & 25 September 2022

As expected, auction volumes across the capital cities were significantly lower, due to the Grand Final on Saturday. As we move into the second month of the Spring selling season, auction volumes will increase again.

In its August report, the PropTrack Home Price Index showed that Australian home prices fell in August, down 0.39%. However, despite recent falls, prices are still significantly above their pre-pandemic levels. Regional areas remain up almost 50% since March 2020 and capital city prices are up 26% over the same time period.

Throughout the COVID-19 pandemic, we saw house prices rise sharply, as people prioritised more space and a better lifestyle, with record low interest rates also making it cheaper to borrow more.

However, as rates have climbed, the REA Group reports that a new trend is now emerging – the apartment market is holding up better. According to PropTrack's Home Price Index, the decline in unit prices has been less pronounced than that of houses, down 2.6% from the February peak.

Of course, this follows the COVID-induced preference shift that saw houses outperforming units substantially for a prolonged period. Buyers paid a premium for more space and larger homes, when the experience of lockdowns and tough restrictions made apartment living less attractive. For many, the pivot toward remote work and more time spent at home, made larger dwellings a more alluring proposition.

From the pandemic onset in March 2020, house prices rose 35% to their peak in March this year, while unit prices only rose 12% to their peak. But that gap's now beginning to narrow as the apartment market holds up better.

Whilst interest rate increases do have an impact on affordability and house prices, the fundamentals of the property market remain sound. The Australian economy is performing well, with unemployment close to a 50 year low. This will drive stronger wages growth which will increase borrowing capacities. Increased investor activity, as well as immigration, is likely to boost market in large cities and units – which are now cheaper relative to other property types.

We look forward to a busy weekend in property ahead!

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