Another House Price Index to help us keep up with the property market

Want to keep up with what's happening to the housing markets around Australia?

Well now there's a new resource backed by realestate.com.au - their new PropTrack Home Price Index which measures the change in residential property prices across Australia and analyses property market trends.

Here are the key highlights from the March 2022 report:

• Australian home prices increased by 0.34% in March. This is around half the decade-average pace of monthly growth and substantially below the rate of growth this time last year.
• Monthly price growth was highest in South Australia, with Adelaide the top performer of the capital cities.
• Prices fell very slightly in Melbourne in March, with larger falls recorded in Perth and the Northern Territory.
• Regional areas continue to outperform the capitals in the post-pandemic market. Prices have increased 24% in the past year in regional areas, but only 15% in the capitals.
• Over the past year, growth standouts have been Brisbane, regional Queensland, regional NSW and the Australian Capital Territory.

Home price growth has slowed since late 2021

Proptrack report that housing price growth has slowed considerably in 2022.

In March, prices across the country increased at their slowest monthly pace since May 2020, the period just after national lockdowns were lifted.

The new Proptrack report states that in the year to March, national dwelling prices have risen by 18%.

Although the peak of price growth is clearly past, 2021 was such an exceptional year for home price growth - the third fastest episode in Australia's history.

Proptrack economist Paul Ryan says "It would take further exceptional circumstances to match that in 2022."

Regional areas and houses continue to benefit from pandemic-induced preference shifts

Regional areas continued to benefit from relative affordability and preference shifts towards lifestyle locations and larger homes that have followed the pandemic.

Prices have increased 25% in the past year in regional areas, but only 16% in the capitals according to the Proptrack Index.

In March, regional areas across all states outperformed their capital city region.

The strength in regional areas has been particularly evident in regional NSW, Queensland and Tasmania, where growth has exceeded 24% over the past year.

What's ahead?

The housing market has experienced exceptionally strong growth since mid-2020.

This has been fuelled by historic low borrowing costs, unprecedented preference shifts and low volumes of available stock.

The slowing in price growth in late 2021 and 2022 so far has chiefly reflected the reduced influence of lower interest rates on the market.

Mortgage rates have already started to increase, in particular those for fixed-rate loans, which has already started to weigh on home price growth.

The average rate paid on new owner occupier loans is now 2.5%, representing the first increases in several years.

Further - larger - increases in borrowing rates are predicted when the RBA increases the cash rate, widely expected later in 2022.

Price growth in regional markets has been stronger than in capital cities for some time, and we expect that to continue, at least for the first half of 2022. The lure of regional Australia remains strong, with property prices still in most instances significantly lower than the cities, despite recent price increases. But the attraction may wane somewhat as 2022 hopefully marks an uninterrupted year for city lifestyles, and the benefits of denser living areas returns.

The return of investors is the other story we expect to continue in 2022. The return of immigration will rejuvenate a key source of rental demand for landlords, particularly in inner-city regions. Preference shifts since the pandemic have also made both inner city locations and apartments relatively cheap, which comprise the types of homes investors often prefer.

But overall the outlook for price growth remains subdued. As prices have caught up to lower borrowing costs, further gains rely on income growth, which has remained moderate across the country for several years now. This will be balanced by the timing and speed of interest rate increases, which remains the biggest unknown in the housing market for 2022.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.