Despite the national gloom-and-doom forecasts back in March 2020, the Australian property market saw growth not witnessed for a generation. This year, 2022, property prices have somewhat steadied (on the East Coast in particular), with lower growth rates than we saw over 2020 and 2021.
12 months in review
Looking back over the past 12 months, it’s pleasing to share that home values are still the highest they’ve been for decades, with Perth’s median house price now surpassing its previous peak in 2014. Although there is quite a bit of media around declines on the East Coast now starting to occur, it’s important to remember that the fall in these areas comes off extraordinary growth, and that the national property reports and outlooks are not always consistent with the market here in Perth. The East Coast experienced a much sharper upward trend over the last few years, whilst Perth had more steady growth, with the correction now occurring on the East Coast not happening in Perth.
Consumer sentiment
As at 02 August 2022, the ANZ-Roy Morgan Consumer Confidence index which measures consumer sentiment, was sitting at 84.1 points, just 8.2 points below the ‘normal’ weekly average of 92.3 points. The small drop is due to investors, lenders and home buyers factoring in the higher interest rates, energy and food prices of recent months, and as these prices ease, we expect to see confidence continue to climb back to normal.
HOMEOWNER UPDATE
Property values
While low interest rates supported housing market activity for the past few years, as we have seen inflation is now leading the Reserve Bank to raise them. Keeping in mind, interest rates are still really low comparatively, just not at the record lows of the past few years. Based on what is happening in the United States and Europe, there is some market commentary to indicate that the interest rates will stabilise by around March 2023. However, as noted by Tim Lawless from CoreLogic, indebted households are still very sensitive to these rate hikes.
Over July 2022, five of the eight capital cities saw a decline in property prices, however Perth (+0.2%), Adelaide (+0.4%) and Darwin (+0.5%) remained in positive growth through July. The “spring selling season” appears to be alive and well in Perth, and it is expected that in the other areas that have had negative growth, there will be a slight bounce-back in September or at least when warmer weather encourages more seller and buyer activity and as buyers and sellers become accustomed to more normal property market conditions.
Property auctions
There is quite a bit of media about auction clearance rates, which are a strong market indicator on the East Coast of Australia. In Perth however, there are only a limited number of auctions, hence it doesn’t provide much local data for us here in Perth.
There have been auction clearance rate declines in capital cities in the third week of August 2022, with Sydney and Melbourne sat at 56% while Brisbane (44%), Adelaide (64%) and Canberra (50%) were all below historical highs. However, according to The Australian Financial Review, auction clearance rates rose for the third week in a row to 14 August, with listings up 9% over the previous week. Louis Christopher of SQM Research believes these are signs the auction market is leveling out and “The market has now found a base of buyers who see value in the market”. This is good news for sellers and buyers alike.
Supply and demand
Another positive aspect is that properties for sale are still lower than the longer term average, with demand continuing to exceed supply, particularly with the interest from interstate investors in the Perth market. There seems to be increasing interest from these investors due to the yields of 5% and above available in the Perth market, due to the median house price being the second lowest in the country (behind only Darwin), while rental prices continue to increase with the rental and accommodation squeeze going on nationwide.
INVESTOR UPDATE
Rental listings
Investors are definitely taking advantage of good returns, with a continuing level of demand for rental properties across Perth. Nationally, the vacancy rate is, as of 2 August 2022, sitting at 0.9%, meaning it’s difficult for renters to find suitable properties, which in turn inflates the weekly rent as multiple tenants do whatever they can to secure a place to live. In Perth, this month we have reached a record low vacancy rate of 0.4%, making it one of the most difficult places in Australia to secure a rental property.
Further to this, as building activity slowed or ground to a halt during the peak of the pandemic, the usual pipeline of homes coming to the market has been delayed, leaving renters at a further disadvantage.
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If you’d like advice about the property market, whether you want to sell, buy or lease, we know our area and understand the market. Please get in touch. We’re here to help.
