Everyone’s rock bottom is different. Some, for instance, consider eating a bag of Smarties in bed for dinner on a Thursday while re-watching season 10 of Below Deck to be a sign of success.
For others, socks and sandals unite as evidence of elite status. But when it comes to Sydney’s property market, some economists have been bold enough to declare that house prices have finally bottomed out.
In a reversal of the housing market’s 10-month downturn, the median value of properties sold across the country went up by 0.6% in March. An unexpected record return in overseas migration has kicked off an upswing in property values as demand far exceeds supply. According to the latest Australian Bureau of Statistics data, there was a net increase in the migrant population of 303,700 people during the year to September 2022—exceeding pre-pandemic numbers.
After RBA hit pause on raising interest rates for the 11th consecutive time, keeping them at 3.6%, consumer sentiment has strengthened, with the ‘time to buy’ sub-index rising by 8.2%. Add rapid population growth along with dwindling housing supply, and you’ve got a classic case of upswing on your hands. In March, price growth in Sydney’s exclusive eastern suburbs jumped by 3.1%.
Australia’s robust population growth recovery has put further pressure on an already tight accommodation market, with rental prices soaring. Eye-watering rent prices may convince new migrants to buy immediately, which is no easy feat considering the number of property listings still sitting at below-average levels. Less choice means more competition, which drives higher prices.
Further data across housing finance, consumer sentiments, vendor discounting and sales volumes has led key property data analysts to declare the housing price downturn to be over in Sydney and Melbourne—the two biggest housing markets in Australia.
CoreLogic’s head of research, Eliza Owen, believes the national housing market downswing may have bottomed out in early March, as increasing asking prices and auction clearance rates have continued to climb over the past six weeks. According to SQM Research, asking prices for Sydney houses climbed by 0.7% over the past four weeks to April 11. Meanwhile, Melbourne saw a 0.9% increase and 0.7% nationwide. Though while larger markets are making gains, smaller markets like Darwin and Hobart are still experiencing a downturn.
Not all economists are in agreement, however. Those who forecast further interest rate rises on the horizon also believe that it will be a drag on the property market. Challenger’s chief economist, Jonathan Kearns believes that “interest rates will remain high for a while. I suspect they will need to go a bit higher. Unemployment hasn’t even started to rise, and it will have to get inflation down and real wages will fall a bit further.”
With the worst of it possibly behind us in Sydney, how did we fare? While it definitely got dicey there for a minute, the average forecast of a 15% decline in national home values ‘peak-to-trough’ never eventuated, instead falling 9.4% at their lowest. Still, it’s the largest housing market downswing on record. In Sydney, from boom to bust, house prices dropped 14%, and in Melbourne, 9.8%.
Now, finally, the light at the end of the tunnel is brightening both buyer and seller’s outlooks. For those with a cautious confidence, put the Smarties away—it’s time for champagne!
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