Sydney demonstrated an increase in median values for the first time in effectively 12 months in February 2023 with median values increasing 0.3%. At that time other capital city data reflected a slowing in value decline. The most recent Core Logic Hedonic Home Value Index report (March 2023) showed Sydney’s values increasing by a further 1.4% and was now joined by Melbourne, Brisbane and Perth, demonstrating a return to value increases also.
The RBA also released recent data assessing the position of household mortgages.
As the graph shows, more than 60% of mortgagees were at least three months ahead on their home loans in December, while "almost half had buffers equivalent to more than a year".
The RBA also found that the share of non-performing loans (i.e. those in which the borrower is more than 90 days behind on their repayments) "remain around the lowest level over the past decade" and that "no banks are reporting a material increase" in non-performing loans.
Changes in interest rates have certainly impacted buyer behavior, however, a return to average interest rates from emergency levels has not limited purchasers' abilities to transact. The speed and intensity of the rate rise from May through to the end of January 2023 did create a level of uncertainty and a subsequent “wait and see” approach with an estimated 43% of the buying public placing their search on hold, with an expectation a delay would result in more cost-effective purchasing.
With certainty returning, we have undoubtedly witnessed a significant increase in buyer activity in most markets across the country, with auction clearance rates reflecting the increased competition as those dormant buyers make their return.
Core Logics weekend market summary from 16 April 2023 shows the largest auction weekend by volume of this year and one that was expected to substantially witness a decline in clearance rates as a result - the actuals opposed the forecasts and saw most markets continue to maintain improved auction clearance rates, with early indicators also demonstrating further price increases across most capital cities in the first two weeks of April.
The most recent ABS data for March 2023 confirms the national unemployment rate at 3.5% provides evidence of continued strength within the Australian job market. When coupled with significant volumes of skilled migration as planned, continued demand within the residential property sector is likely to continue to see a further stabilisation in values, particularly with more certainty around the endpoint of interest rates.
What we do know is that overseas migration will firstly have an impact on the rental market, particularly in the two major cities, Sydney and Melbourne. Furthermore, historical data shows that 12-18 months after arriving in Australia, the trend toward homeownership increases. Two obvious factors are immediate rental demand placing further pressure on median rents in these two markets primarily—great for existing investors. Likewise, short-medium term demand in the sales market will generally reflect positive appreciation in values due to the increased demand.
If you’re looking to purchase an investment property, expand your existing portfolio or find a family home, get in touch to discover how Brad and the Milk Chocolate team can help.
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