Property downturn grinds to a halt as growth returns to a key city
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February brought Australia's property downturn to a surprisingly swift pause as national home values held more-or-less flat for the month.
CoreLogic's latest report showed all but one city improving on January's outcomes, with Sydney breaking through to positive growth for the first time in over 12 months.
Is the market finally bottoming out, or are further declines on the way?
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National property values: February 2023
The median Australian home price fell by just -0.1 per cent in February, a sharp and sudden levelling of the wider property market downturn.
Aside from Hobart, every capital city managed to restrict declines to -0.5 per cent or less for the month, representing the strongest month since interest rate hikes began.
| Market | Month | Quarter | Annual | Median value |
|---|---|---|---|---|
| Sydney | 0.3% | -2.4% | -13.4% | $1,006,923 |
| Melbourne | -0.4% | -2.7% | -9.6% | $743,554 |
| Brisbane | -0.4% | -3.2% | -6.8% | $694,495 |
| Adelaide | -0.2% | -1.4% | 5.1% | $645,812 |
| Perth | -0.1% | -0.2% | 2.4% | $561,740 |
| Hobart | -1.4% | -4.9% | -11.8% | $658,470 |
| Darwin | -0.3% | -1.0% | 2.9% | $495,712 |
| Canberra | -0.5% | -2.7% | -6.7% | $833,155 |
| Combined capitals | -0.1% | -2.3% | -9.1% | $761,674 |
| Combined regional | -0.3% | -2.1% | -4.2% | $575,916 |
| Australia | -0.1% | -2.3% | -7.9% | $702,136 |
Sydney returned to positive growth for the first time since January 2022, with prices notching up +0.3 per cent for the month and pushing the median home price back over $1 million.
Melbourne and Brisbane both experienced relatively nominal losses of -0.4 per cent, while Adelaide continued to hold close to flat at -0.2 per cent.
Perth too held the line at -0.1 per cent for the month. Darwin and Canberra also kept losses to below half a per cent.
Hobart was the only capital city market that showed continued signs of struggle in February as further losses of -1.4 per cent were recorded.
The more resilient regional markets also saw a softening of their declines, delivering a monthly price change of just -0.3 per cent.
While the apparent pause of the downturn may inspire hope that prices will rebound in 2023, CoreLogic's research director Tim Lawless cautioned there may be more falls to come yet.
"Considering the RBA’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labour markets, there is a good chance this reprieve in the housing downturn could be short-lived," he said.
Persistently low listings have held prices up
The key driver of the newfound price stabilisation has been an ongoing shortage of listings, something that's persisted since last year's unusually flat spring selling season.
Across the capital cities, new listings in February were down -17 per cent on the same period last year and -11.9 per cent lower than the five-year average.
Total available stock has also fallen more than -20 per cent below the five-year average, so there is a significant shortage of homes for buyers to compete over.
"So far, it seems prospective vendors are prepared to wait this downturn out," Mr Lawless explained.
"The flow of new listings is well below average for this time of the year across each of the major capitals. The flow of new listings will be a key trend to watch over the coming months. Any signs of listings activity moving to above average levels could weigh on housing prices."
While sellers have sat on the fence, buyer demand has been on the up. National home sales for February were up +39.4 per cent on January.
Auction clearance rates also averaged close to +70 per cent for the month across the capital cities, suggesting increased strength on the demand side.
Regional markets enjoy a similar easing in declines
Australia's regional property markets have broadly outperformed the capital cities over the course of the downturn. While that wasn't quite the case in February, the regions also saw a significant uplift in conditions.
| Market | Month | Quarter | Annual | Median value |
|---|---|---|---|---|
| Regional NSW | -0.5% | -2.9% | -7.1% | $684,764 |
| Regional VIC | -0.4% | -1.8% | -5.1% | $561,512 |
| Regional QLD | -0.3% | -1.9% | -3.0% | $553,156 |
| Regional SA | 0.4% | 1.6% | 13.2% | $358,258 |
| Regional WA | 0.2% | 1.1% | 4.6% | $423,045 |
| Regional TAS | -1.0% | -2.4% | -3.3% | $503,805 |
| Combined capitals | -0.1% | -2.3% | -9.1% | $761,674 |
| Combined regional | -0.3% | -2.1% | -4.2% | $575,916 |
Regional home values dropped just -0.3 per cent over February, a number that CoreLogic said would likely have matched the combined capitals' performance if Sydney's performance hadn't been so strong.
"Each of the broad rest-of-state regions, apart from NSW, recorded a monthly outcome that was inline or stronger relative to their capital city counterparts," the report read.
Regional South and Western Australia remained the top two performers still delivering positive growth, though losses were minimal in every other state save for Tasmania.
The 'fixed-rate cliff' could shake the market up again
Although February brought a surprising level of stability to property prices, there could be more turbulence up ahead.
CoreLogic called the impending 'fixed-rate cliff' "one of the biggest potential risks to housing market values" in 2023. So what exactly is it?
Between January 2020 and October 2021, roughly 1.2 million new home loans were financed at record-low rates, with more than a third of that debt coming in the form of fixed-term mortgages.
For the majority of those people, their fixed rates are due to expire over the coming months, at which point they will face far higher mortgage repayments, putting some households under serious financial pressure.
With that cliff due to start hitting, Mr Lawless suggested that "arguably the full impact of the aggressive rate hiking cycle is yet to play out."
For the time being, CoreLogic's head of residential research Eliza Owen said that "listings data and arrears data suggest there is minimal impact on the housing market from defaults."
The real test, though, will come over the remainder of the year. If distressed listings ramp up significantly as homeowners struggle to service their loans, the downturn may begin to accelerate again.
What's next for the Australian property market?
CoreLogic's report stated that "it’s probably too early to call a trough in the cycle considering there are several factors which could trigger a ‘re-acceleration’ of housing value declines over the course of the year."
Ten months on from the RBA's first cash rate hike and the key question remains the same: when and how high will rates peak?
The RBA's latest messaging has been widely described as 'hawkish', and three of the big four banks are now forecasting rates to rise from the current 3.35 per cent rate all the way up to 4.1 per cent.
Pushing rates that high would add further negative pressure to the housing market as there would be a growing risk of stock levels increasing due to forced sales.
All eyes will be on the RBA over the coming few months as well as new listing levels to understand whether the 'fixed-rate cliff' does indeed have a major impact on prices.
The longer-term outlook is promising, though. The report noted that "despite the headwinds accumulating for the housing market in 2023, there is no denying the fundamental under-supply of housing stock."
"With the cash rate expected to stabilise later in 2023, there could be a pick-up in buyer demand through the second half of the year, or early in 2024."
1. CoreLogic News, ‘CoreLogic Home Value Index: Value declines flatten as low advertised stock levels keep a floor under prices’, 1 March 2023
https://www.corelogic.com.au/__data/assets/pdf_file/0012/13341/2303-CoreLogicHomeValueIndex-Mar23-FINAL.pdf
2. CoreLogic News, ‘Five things to know about the ‘fixed-rate cliff’’, 24 February 2023
https://www.corelogic.com.au/news-research/news/2023/five-things-to-know-about-the-fixed-rate-cliff
