The decline in property prices has slowed for now, the latest data shows.
CoreLogic marks its smallest monthly decline since May 2022.
National property prices fell just 0.14% in February, with Sydney
Median prices rose by 0.3%, leading the recovery. All other state capital cities saw prices fall in February, with Melbourne and Brisbane both down 0.4%, Canberra down 0.5%, Darwin down 0.4%, Adelaide down 0.2% and Perth down 0.1%, while Hobart saw the biggest fall, plunging by 1.4%.
CoreLogic research director Tim Lawless said the stability in house prices over the past month was consistent with consistently low advertised supply levels and rising auction success rates.
“Over the past four weeks, new listings in the Tokyo metropolitan area have been down 17.0% compared to last year and 11.9% below the five-year average,” Lawless said. “The trend of new listings being below average has been evident since September last year and coincides with a loss of momentum in the rate of price decline.”
Source: CoreLogic
Auction success rates also recovered last month, reaching the high 60% range in the capital region towards the end of the month, with Sydney's success rate exceeding 70% for the first time since February 2022.
The capital area's luxury housing market led the stable trend this month, rising 0.1% in February. Though still on a downward trend, the overall low-priced housing market also stabilized at a 0.1% decline.
Sydney luxury properties again came out on top, increasing in value by 0.7% over the month, with the bottom quartile of the Sydney market overall dropping in value by 0.2%.
Meanwhile, local prices fell 0.3% in February, compared with a 0.1% drop in the greater Seoul area as a whole. Since peaking in June last year, the regional composite index has fallen 7.7%, while the greater Seoul area composite index peaked slightly earlier, in April 2022, and has fallen 9.7%.
Despite the positive results, Lawless warned that price increases may not last.
“Given the RBA's shift to a more hawkish stance at its February meeting and expected weakening economic performance and easing in the labour market, any lull in the housing market weakness is likely to be short-lived,” Lawless said.
“We are also facing a fixed-rate cliff, with the full impact of an aggressive rate-hiking cycle likely yet to be felt.”
The number of listings remains low
One of the major factors contributing to the surge in national stock price indexes is the tight inventory in the market.
There was a notable increase in new listings in February, with around 11,250 more listings than the previous month, but the figure is still 12.6% below the five-year average for this time of year.
“For now, potential vendors seem prepared to wait out this downturn,” Lawless said.
“New property inflows in each of the major cities are well below average for this time of year. New property inflows will be an important trend to watch over the coming months.”
“Any signs of listing activity rising to above-average levels could weigh on home prices.”
Source: CoreLogic
Rents soar
According to CoreLogic, the highest rental growth is currently occurring in the unit sector in the three major capital cities, with unit rents in Sydney increasing by 16.7% over the past year.
“Rents in major cities were weak in the early stages of the pandemic but are now 19.0 per cent higher in Sydney since the start of the COVID-19 outbreak, 10.4 per cent higher across Melbourne and 23.6 per cent higher in Brisbane,” Mr Lawless said.
“Several factors appear to be contributing to the rise in unit rents.
“Pressures on rental affordability may force demand to shift towards higher density rental options.”
“Furthermore, a significant increase in foreign students and international immigrants will increase rental demand, particularly in city centres and areas close to universities and transport hubs.”
Downside risks remain
Lawless said despite recent stabilization trends, housing risks remain tilted to the downside.
While housing market activity in February suggests that market conditions are strengthening again, new property inflows have remained below average since September last year, leading to a slowing of the pace of price declines.
However, it is probably too early to predict a cyclical trough, given that there are several factors that could trigger a “re-acceleration” in home price declines this year.
Lawless said that following the recent interest rate hikes, further interest rate hikes are expected this year and a further decline in borrowing capacity is also expected, which could see the housing market decline accelerate again.
Low levels of advertised inventory are likely to persist as homeowners hesitate to sell in a weak market, but a small number of potential sellers may be motivated or forced to sell as challenges to servicing capacity increase.
These challenges include the continued rise in interest rates, more borrowers being exposed to higher interest rates as most fixed terms come to an end, rising unemployment and the rising cost of living.
Lawless said that while the market is showing signs of recovery in the longer term and headwinds for the housing market will intensify in 2023, the underlying undersupply of housing inventory cannot be denied.