8th June 2023 / Sarah Lowry: Where is the property market at?

As Aussies across the country adjust to the news of another interest rate rise, it may surprise many that property prices are being reported as on their way up again.

Even whilst in the grip of the COVID-19 pandemic, just two short years ago, Australia experienced a property boom of epic proportions. Amid the chaos of lockdown orders (particularly for poor Victorians!), travel restrictions and toilet paper shortages, Australians went mad for real estate, with a focus on relocating, upgrading, and renovating, sending prices soaring to unprecedented levels.

The market then adjusted with the commencement of an unanticipated and aggressive cycle of interest rate rises, from May 2022. Despite predictions that prices could fall by as much as 25%, our property market is digging its heels in.

The Domain Group reports that nationally, the median house price is up by 0.4%, not much in the grand scheme of price rises – but the most recent Domain data shows that houses are selling faster, the proportion of properties being sold at a discount is falling, and auction clearance rates have bounced back…big time.

Domain's auction report for May found that clearance rates across the combined capitals had increased to a 17-month high of 71% - the highest point since October 2021.

We have seen strong crowds at most auctions, with multiple bidders on most occasions and our group has been achieving clearance rates above the industry average.

Australia's four largest banks have all revised their housing market forecasts, shelving their previously more dire predictions for more positive price rises going into 2024. Westpac and CBA are now forecasting house price rises of 5% in 2024 and ANZ is forecasting a rise of 2% next year. NAB is forecasting very moderate rises.

It may seem confusing that houses prices would continue rising in the face of successive interest rates, but an integral factor is the lack of stock on the market – there simply isn't enough property for sale. Compared to this time last year, and depending on the location, there's anywhere from 10-20% fewer homes for sale right now, according to Domain's data.

Although there are affordability restraints with borrowing, thanks to those 12 interest rate rises, there are still buyers who need to purchase. The competition between buyers for very little housing stock on the market is helping to fuel prices.

Another key development this year has been the resurgence of net migration. Westpac senior economist, Matthew Hassan, notes that barely 1.25% of all dwellings are on the market at the moment; that's a cyclical low going back to the GFC. It we think about those 400,000 net migrations coming in; it only takes five, 10% of those inflows to be active purchasers in the housing market for there to be a discernible shift in the demand picture."

Of course, most people want to determine whether or not they should buy or sell now…or wait. Ultimately, it is best to think about property transactions in the long term – Domain economist Nicola Powell's advice is to transact where and when you can afford it. "Our research has shown that, over time, it's not when you get into, or buy and sell, in the market. It's less about timing and more about time spent in the market."

If you would like to discuss your property situation in the current market, please reach out to your local Fletchers area expert.