Property report gives overview of the Australian real estate market
PRD Australian Economic and Property Report shows, that some buyers are active, others are running scared, a few areas are holding value, and others are diving.
Residz Team 4 min read
Australia’s first home buyers are down by a third, construction materials have doubled in price, and owner-occupiers are in retreat. PRD’s Australian Economic and Property Report has been published, and it shows an Australian real estate market running at multiple speeds. Some buyers are active, others are running scared, a few areas are holding value, others are diving. Let’s have a look at some of the key findings.
The price peak and the performance patchiness
The second half of 2021 was the peak of the real estate market.
In 2022 buyers can borrow less and owners are faced with higher mortgage repayments, so sellers in many markets are being forced to either accept a lower price or withdraw their listing.
Sydney and Melbourne house and unit prices are dropping in value, although the drop in the median house price in both markets is modest.
However, Brisbane and Darwin have seen median house price growth of 25.3% and 12.3% in the 12 months to first half 2022.
Consumer confidence in a spin
Consumer confidence in 2022 ‘has taken a 180 degree spin’ compared to the 12 months prior, says the PRD report. It was above the 100 index point positive benchmark, peaking at 118.8 in April 2021. It’s fallen to 83.8 index points in July 2022.
The only other period in which consumer confidence was around this low was in 1990-1992.
“Being at a historical low is concerning.” - PRD report
Business confidence also saw a significant decline.
Sellers waiting bit longer
Combined capital city median days on market was 27 days in May 2022, higher than the 21 days on the market in May 2021.
Metropolitan cities have shown strong market activity. Combined metro settled sales increased by 26.6% in the 12 months to May 2022.
Regional sales strong due to supply but growth is slower
Regional settled sales increased by 45.8% in the 12 months to May 2022.
Most regional markets continue to grow in value thanks to their relative affordability. However, the impact of a higher cash rate has meant slower than average growth of 9.6% in the 12 months to the first half of 2022.
First home buyers cautious
First home buyers (FHB) have been increasingly priced out of the property market. They began pulling back from the real estate market in early 2022 and the report shows the FHB finance commitment is back to 2020 levels.
“The decline in first home buyer loans was evident in each state, which is quite unusual to Australia.” - PRD report
The number of first home buyer loans approved in Australia has retracted by -33.9% in the 12 months to the March quarter of 2022.
29,093 first home buyer loans were approved in that year.
First home buyers have been ‘rent-vesting’ in regional markets as an entry point to their dream property.
Population changes affecting the market
There’s been some major population changes in Australia. Tasmania and the ACT both grew more than 5% in size in the 12 months prior to December 2021.
Queensland had the highest interstate migration, welcoming an extra 19,247 people in that time.
NSW and Victoria still see a decline in interstate migration.
Long-term overseas visitors are flooding back, down as low as 2330 in April 2021 but rising to 29,380 a year later.
International students are up to 21,130 in April 2022 (from only 260 in April 2021).
Fewer owner occupiers as home loans become less affordable
Housing finance figures from May 2022 show the proportion of owner-occupiers declined from 72% to 65%.
Home loan affordability has declined the least in VIC, at -1.7%, and the most in the ACT and SA, at -14.9% and -12.9%, respectively.
“This is significant, as VIC was traditionally known as the more expensive market compared to SA. Different markets are now moving at different speeds and creating an increasingly different property market for Australians.” - PRD report
Investors take advantage of extremely low vacancy rates
Housing finance figures from May show the proportion of investors increased from 28% to 35%.
Australian rental property vacancy rates have plunged to historic lows.
Investors could benefit from these critical shortages of rental accommodation in most locations, depending on property sale price and rental price growth.
“This is key information for investors.” - PRD report
Construction and future supply
Construction materials have doubled in price, and the number of tradespeople has almost halved. Qld, Tas, and NT have seen a double-digit decline in the value of residential construction spending over the past 12 months. Victoria has also seen a decline of -7.5%.
“The increasing number of residential projects either delayed, deferred or abandoned has resulted in a supply issue for ready-to-sell stock, and even more so for detached dwellings (houses).” - PRD report.
Residential construction did grow in NSW, WA, and ACT in the six months to the March quarter of 2022.
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Information compiled from PRD’s Australian Economic and Property Report. Graphs from PRD report.