Property prices nationwide continue to recover, rising 0.5% in April following a 0.6% increase in March, according to the latest data from CoreLogic.
Nationwide, home prices fell 9.1% after the COVID-19 boom, but recent signs suggest the housing market downturn may be coming to an end. But despite the recent price declines, the median home price in the Capital Region remains 12% higher, or about $83,000, than it was at the start of the COVID-19 pandemic in March 2020.
Leading the property price recovery is Sydney, where prices rose 1.3% in April and have increased in house prices every month since February. Sydney prices are now 3% higher than their January lows.
Prices in Brisbane rose 0.3%, Melbourne 0.1%, Adelaide 0.2% and Perth 0.6%. Darwin was the only capital city to experience a decline, with prices falling 1.2%, while prices across regional Australia also rose 0.1%.
Source: CoreLogic
CoreLogic research director Tim Lawless said the housing market appeared to have reached a tipping point.
“A variety of indicators support positive changes, with home prices stabilizing or rising in most parts of the country, auction success rates slightly above their long-term averages, sentiment improving and home sales trending near their five-year averages,” Lawless said.
Lawless attributes the increased demand to immigration, which is reaching record levels.
“A large increase in net overseas migration is colliding with a housing supply shortage,” he said.
While housing conditions are improving, home prices in most regions remain below recent cyclical peaks.
Hobart has experienced the largest fall, down 13% from its recent market peak. Sydney house prices have fallen 13.8% from their market peak to their recent low, but a 3% increase in prices over the past three months has meant the market is down 11.2% from its recent high. Brisbane has seen the third largest fall, with prices remaining 10.7% down from their recent peak.
Inventory levels remain below average
The main factor supporting the housing market is a lack of inventory supply, a common theme in recent years.
Mr Lawless said total advertised inventory was 21.8 per cent below the five-year average for this time of the year as new property inflows remain below average.
“New listings are highly seasonal, typically tapering off over the winter and then picking up in the spring and early summer,” Lawless said.
“At the moment, this seasonal trend appears to be holding, with new property inflows again trending towards winter. This will be an important trend to watch.”
“As market conditions improve, there may be an increased willingness for potential vendors to test the market and get ahead of the spring rush, when competition among vendors will be more pronounced.”
The rental market is tight
The CoreLogic rental price index recorded a further increase of 1.1% across the capital region in April, while regional rents increased by a smaller 0.5%.
Lawless believes immigration is making life very difficult for tenants across the country.
“There is also increasing rental demand from international migrants, particularly students, and this tends to be more prevalent in city centres and areas close to universities and transport hubs, which generally tend to have higher densities of rental housing.”
“Another factor is the lack of supply of new units. Approvals for medium and high density housing have mostly been below average since 2018, setting up a chronic supply shortage across the medium and high density sector in the coming years.”
Outlook
Lawless said Australia's housing market appears to have experienced a relatively short but severe downturn.
“The main driver of this positive change appears to be higher than expected net overseas migration, which has created additional housing demand at a time when renting conditions are extremely tough and advertised supply is well below average,” Mr Lawless said.
He said that while an end to the recession seems certain, home prices are unlikely to rise significantly until interest rates fall, credit policies are relaxed, a housing-focused stimulus package is introduced, or a combination of these factors.
Lawless said the outlook for the housing market will depend primarily on interest rate movements.
“The timing of rate cuts remains highly uncertain, but lower rates could provide sustained momentum to the housing market,” he said.