Australia's property rebound continues after further growth in April

Another strong month for Australian home values has led many economists and experts to declare the wider property downturn over. 

CoreLogic's latest report¹ shows further price stabilisation across most of the country as increasing demand outstrips dwindling supply. 

With consumer confidence rising, interest rates approaching their peak, and buyer activity ramping up, is a full-blown recovery already underway for Australian property?

National property values: April 2023

After March brought the first national growth in 10 months, the median Australian home price received another +0.5 per cent boost over April, with only one capital city market seeing price declines for the month. 

Sydney led the momentum shift once again, delivering a very strong +1.3 per cent uptick. Melbourne remained in positive territory, but only just, notching up by +0.1 per cent. 

Brisbane and Adelaide also posted modest growth of +0.3 and +0.2 per cent respectively, helping to strengthen the idea that Brisbane's sudden and sharp correction is now over. 

Like Sydney, Perth has been a standout performer, with median prices hitting a new all-time high after another +0.6 per cent increase in April. 

Hobart and Canberra both held flat after weaker runs recently, while Darwin saw a -1.2 per cent decline for the month. 

On the whole, regional markets showed softer results but remained in growth territory with a combined +0.1 per cent bump. 

CoreLogic's Research Director Tim Lawless projected confidence, saying "Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift."

"Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average."

A severe listings shortage can't keep up with growing demand

A lack of stock on the market has been a key trend since September 2022 and that shortage has only accelerated in recent months. 

New listings over April were -22.9 per cent lower than the same period 12 months ago, while total available stock sits -21.8 per cent below the five-year average. 

Buyer demand, on the other hand, has been strengthening. Home sale volumes across the capital cities are just -2.4 per cent lower than the five-year average, meaning demand is now significantly outstripping supply. 

"If we see a further lift in consumer sentiment there is a good chance housing activity will trend higher," Mr Lawless said. 

"This has certainty been the case historically, where measures of consumer sentiment and the number of dwellings sales have shown a high correlation."

Typically, listings would be expected to dwindle even further as winter approaches. Mr Lawless suggested there may be an uptick in listings ahead of the spring selling season, though, if conditions remain favourable to sellers.

Tight rental markets and surging migration are key drivers of growth

There has been increasing talk about Australia's rental crisis over the past year or two as vacancy rates have remained at historic lows and asking rents continue to skyrocket. 

Net migration into Australia has risen rapidly since international borders reopened, and it's now forecasted that an additional 700,000 people will be adding to that competition between the 2022 and 2024 financial years.²

Mr Lawless reiterated that "a significant lift in net overseas migration has run headlong into a lack of housing supply."

He suggested that, with so much pressure across rental markets, "it’s reasonable to assume more people are fast tracking a purchasing decision simply because they can’t find rental accommodation."

Westpac Senior Economist Matthew Hassan agreed³, adding that "there’s not really an end in sight in this tight rental market and rents are likely to continue to move higher."

As the rental environment worsens, it's likely that a growing number of first home buyers will emerge and add to competition over the already-diminished supply of properties for sale, helping to push prices higher.

What's next for Australian property?

It's looking more and more clear that, unless another major unforeseen disruption comes along, the housing downturn is now over. 

Mr Lawless pointed out that "typically, we wouldn’t see housing values start a new growth cycle until monetary policy started to ease, credit policies loosened or some level of fiscal support was introduced. The shift towards more positive conditions has come about in the absence of these factors."

"The key drivers of this positive inflection seem to be the larger than expected rise in net overseas migration which has created additional housing demand at a time of extremely tight rental conditions and well below average levels of advertised supply."

Major banks like NAB and Westpac have revised and softened their previously negative forecasts in light of this. Westpac now sees prices holding flat throughout 2023.⁴

Even so, the May interest rate rise came as a surprise to many economists, and further hikes could threaten to interrupt the emerging growth trend. 

Looking longer-term, the question is around when interest rates will start being cut, at which point CoreLogic said "we could see more sustained momentum gather in housing markets."

For now, though, vendors look to be back in a strong position as competition between sellers continues to shrink while buyer demand swells.

1. CoreLogic News, 'CoreLogic Home Value Index: Further evidence Australia’s housing downturn is over', 30 April 2023
https://www.corelogic.com.au/news-research/news/2023/corelogic-home-value-index-further-evidence-australias-housing-downturn-is-over

2. ABC News, 'Australian migrant population growth hits all-time high as borders reopen', 29 April 2023
https://www.abc.net.au/news/2023-04-29/australian-migrant-population-growth-hits-all-time-record-high/102281798

3. Sydney Morning Herald, '‘Whiplash’: Rental crisis deepens as Sydney unit rents jump $120 a week in a year'
https://www.smh.com.au/property/news/whiplash-rental-crisis-deepens-as-sydney-unit-rents-jump-120-a-week-in-a-year-20230404-p5cy0w.html

4. Westpac IQ, 'Australia’s housing market set to stabilise', 24 April 2023
https://www.westpaciq.com.au/economics/2023/04/aus-housing-finance-declines-slow-3-april-20231