Australian property prices are staging an extraordinary rebound, with the market eyeing growth in 2023 despite earlier predictions that rising rates would trigger a massive downturn.
With major capital housing markets returning to growth in the past two months and a resurgence in auctions, economists are rethinking the outlook for the biggest family assets this year.
PropTrack’s Cameron Kusher says property prices could finish the year higher than where they started, despite earlier forecasts they could fall between 7 and 10 per cent as rates increased.
“We have seen more interest in property and there’s just a real lack of stock. People who are buying don’t have the ability to bid down prices,” he said.
“If stock levels remain low, there is a world where we do see prices higher by the end of the year.”
Andrew Wilson, chief economist at My Housing Market, predicts property prices will rise in 2023, though a slowing economy as interest rates take their toll is a key uncertainty moving forward.
“We have to challenge the assumption that rising interest rates means lower prices,” Dr Wilson said.
“There are other dependencies that are more important.”
‘Terrible rental market’
Australian house prices rose 1 per cent between February and April, following a 9.1 per cent fall between May 2022 and February 2023, CoreLogic reports.
Dr Wilson, who expressed scepticism at earlier big bank forecasts that property prices would fall massively in 2023, said low housing supply and rising demand explained the rebound.
“It’s the classic economic insight – supply and demand,” he said.
“We’ve got clearly undersupplied housing markets, and we’re also seeing a surge in new demand.”
That rise in demand has two components, he said, a surge in migration and an escalating crisis in the rental market pushing those who can afford it to try and buy.
“The issue for first-home buyers is not just wanting to be an owner, but it’s also escaping the terrible rental market,” Dr Wilson said.
The other factor is that there are “value opportunities” in the market right now for those with a deposit already saved up because prices in major capitals fell in the 10 months before March.
City prices driving surge
Mr Kusher said the property rebound has been driven so far by inner-city areas in Sydney, Brisbane and Melbourne – markets where buyers are typically more affluent and might not be adversely affected by rising interest rates.
These are also markets where listings are relatively limited by historical standards, an issue that has become prevalent across the country, too.
“There’s very little stock coming onto the market,” Mr Kusher said.
“The total number of properties on the market is up from a year ago by 5.6 per cent, but it is down 31.6 per cent compared to its decade average.”
The types of buyers coming back into the market have also been interesting, with Mr Kusher saying much of the rebound is due to families upgrading their position on the property ladder.
“Generally the feedback we’re getting is it’s upgrade buyers in the market at the moment,” he said. “It’s people buying their subsequent homes.”
Dr Wilson said that while first-home buyer activity is lower than earlier peaks, it has picked up in recent months, despite higher interest rates restricting borrowing power.
“First-home buyers are certainly coming back – that’s a key part of the market,” he said.
Australian Bureau of Statistics (ABS) figures show new mortgages from first-home buyers rose 15.8 per cent, after falling 4.2 per cent in February – that’s still down 21.8 per cent on last year.
