Australia’s property downturn is slowing, the latest data shows, with the steep price falls recorded in September last year easing to smaller quarterly declines and even stabilising in some cities.
Only Sydney, Brisbane and Canberra fell over the December quarter, according to the latest Domain House Price Report, while house prices in Melbourne, Adelaide, Hobart and Perth edged upwards. House prices in Darwin increased by 3.3 per cent.
Unit prices were mixed, proving resilient in Sydney, Brisbane, Adelaide and Darwin – but Melbourne’s median price is in its fastest decline in history and, in Canberra, its fastest decline since 1997.
Nationally, house and unit prices only fell by less than 1 per cent over the three months to December.
“The spring selling season bore the brunt of interest rate shocks and skyhigh inflation levels,” says Domain’s chief of research and economics, Dr Nicola Powell. “This is why the September quarter saw house prices fall at their fastest quarterly rate.
“Sellers had been sitting on the sidelines to see how the housing market downturn unravelled and how high inflation and interest rates would land.
“Now, in the December quarter, the data suggests that the peak rate of the quarterly decline has passed as buyers have had time to adjust to the new norm of rising debt cost and reduced borrowing capacity.”
The top-performing regions in Australia over the quarter were units in Holdfast Bay in Adelaide’s southern coastal suburbs, up 17.5 per cent, units in Bundaberg, Queensland, up 12.9 per cent, and units in the Wagga Wagga and Richmond Valley coastal areas in NSW, which both increased by more than 10 per cent.
The top performing region for house prices in the nation was Dural-Wisemans Ferry in Sydney, where values shot up by 8.5 per cent over the December quarter.
Nationally, house prices have fallen 6.3 per cent from their peak, and Sydney has led the charge – its prices are down 11.3 per cent from the peak – followed by Canberra (6.7 per cent) and Brisbane (6.6 per cent).
Sydney’s house prices have fallen for three consecutive quarters, producing the steepest annual decline in the city’s history. Canberra’s story is the same – the steepest annual decline on record – while Brisbane’s annual falls equate to the steepest in a decade.
However, house prices have still got a long way to go before the massive gains made during the pandemic property boom are erased. Even with an 11.3 per cent loss, Sydney’s house prices are still 24.2 per cent – or $275,388 – more expensive than they were pre-pandemic.
Canberra’s median is a whopping $319,565 more than it was pre-pandemic, and Brisbane’s $205,297.
The outlook going into autumn has improved, Powell says. “While lingering weakness has persisted in the property market, the potential end of interest rate hikes later this year will bring in more buyers and sellers, creating some green shoots for the months ahead,” she says, adding that there are still “possible risks ahead”.
“That doesn’t discount from an unsettled RBA environment and tight serviceability requirements, which will take time for consumers to shake off.”
“Based on calculations from Domain Home Loans, those with a $1 million mortgage are now paying almost $1800 more on their loan than this time last year, which has been a hard pill to swallow.”
However, apartment developers are feeling more optimistic about the way ahead, with hopes that the cash rate will start to stabilise in the second quarter of this year, and that inflation will have passed its peak.
“The uncertainty they produced has been challenging, but we’ve had apartment sales in the NSW regions like Newcastle, Coffs Harbour and Port Macquarie recently which are offering glimmers of hope,” says Luke Berry, director of Third.i Group.
“We think the second half of 2023 will be good, especially with record numbers of migration and a chronic undersupply of new projects. People are now becoming more confident about buying.”
Tim Spencer, head of development at Mulpha, says there’s a lot of pentup demand which is beginning to be unleashed into the market, with its Sanctuary Cove development Harbour One at the start of this year setting a new record of $18,000 a square metre.
“I think interest rate rises spooked the market but we’re now predicting an uplift of demand in the second quarter of this year,” he says.
“There’s low stock, builders are getting back to business, there’s less rain, and confidence is rising.”
For first-home buyers Katie Norbury and Juliana Moore, falling prices in a rising interest rate environment turned out to be somewhat of a blessing in disguise. The couple had been disheartened by the level of competition and spiralling prices at the peak of the boom last year.
“Peak-COVID you had to be offering $50,000 more than the asking price and be ready to jump immediately,” Norbury says. “We really noticed around October a shift in how willing agents were to call us back; they had more time for us.”
Then the couple discovered a rental property two doors down from their rental was going up by $100 a week. It was the final push they needed to buy.
“We knew it was only a matter of time before our rent went up another $100 a week,” Norbury says. “I worked out we’d be paying the same amount in rent as we would in mortgage repayments.”
They found a two-bedroom unit in leafy Alderley, in Brisbane’s inner north and, to their amazement, secured it with no competition.
“It was a private treaty sale; no one was interested in it – we had never come up against that before – which was amazing!” Norbury says. “We offered lower than was asked and were able to negotiate. It was nice to be able to breathe, to take a day to think about it.
“The agents walked us through the buying process and were very supportive. I just don’t think we would’ve got that [support] in the peak of the market.
The whole thing felt more comfortable because we had a day to think about it.”
The couple will move into their new home in the coming weeks after some minor renovations and are not worried by the prospect of further rate rises.
“For us, we were comfortable seeing interest rates rise because I budgeted for them to go to 10 per cent,” Norbury says.
“I expect them to continue to rise; it’s a necessary evil so we can give everyone the privilege of home ownership. I’m 27 and most of my friends can’t consider owning a property. We should be concerned about what’s going to happen in the future.”