Domain report that house prices across Australia's combined capitals increased over the March quarter for the first time in a year.
Australia’s housing market has reverted back to a multi-speed one with some cities showing much more balanced conditions.
House prices in Sydney, Adelaide and Perth increased over the March quarter, while they stabilised in Melbourne and Brisbane.
Weaker conditions are evident in the smaller capital cities as house prices fell over the March quarter in Canberra, Darwin and Hobart.
Another leading economist has reported that the Australian property market is showing signs of recovery.
The latest Domain House Price Report revealed that Australia’s housing market has reached a turning point with house prices across the combined capital cities increasing for the first time in a year.
Domain report quarterly and these findings are in line with other research houses who report monthly and have been suggesting that prices in many locations turned the corner a number of months ago.
Dr Nicola Powell, Domain's Chief of Research and Economics said:
"Australia’s housing market has now fully reverted back to a multi-speed market, meaning different markets are growing at different rates as they were pre-pandemic.
This provides opportunities for both buyers and sellers in different locations.
The shift is being led by our larger capital cities which normally lead the property market recovery given that historically, they hit a peak price earlier and fall faster."
Smaller capital cities, however, experienced weaker conditions, with price drops accelerating in Canberra and Darwin (see Table 1).
Overall, the combined capitals saw a modest quarterly growth rate of 0.4%, which is lower than the historical average of 2.6%.
Table 1: The change in house prices, quarterly and annually.
Table 2: The change in unit prices, quarterly and annually
One key factor supporting prices has been the unusually low number of new property listings since last spring.
This has led to a more significant reduction in supply than in demand, with the total number of homes for sale across the combined capitals dropping by nearly 15% compared to the five-year average.
Meanwhile, interest rates have remained at an 11-year peak, limiting borrowers' capacity to take on debt and increasing borrowing costs.
However, the recent decision to halt interest rate hikes could shift sentiment in Australia's housing market.
Dr Powell explained:
"Although lower listings are creating rising competition between buyers and helping to improve prices in certain markets, high-interest rates and tight serviceability requirements are still keeping many on the sidelines.
As prices lift in certain areas, it’s a timely reminder that interest rates are not the only factor influencing housing activity and prices.
Population growth is rebounding faster than anticipated, with record levels of overseas migration playing a driving role in our housing markets.
Extremely tight rental markets are also making purchasing more attractive and may shift some to buy, given the current challenges of securing a lease."
She added further:
"While the potential for further rate rises remains, inflation is slowing quicker than initially expected.
This could have a positive sentiment flow onto consumers and the push needed for buyers and sellers to return to the housing market.
It provides a more stable environment and suggests interest rates are at, or close, to a peak.
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Buyers have adjusted to this new norm of higher costs of debt and, as we reach the peak cash rate, it will provide them with a better understanding of borrowing capacity."
Sydney's housing market is showing signs of recovery, as both house and unit prices have risen in the March quarter.
However, the current quarterly growth rate of 1.3% is still modest compared to the historical average of 2.8%.
This suggests that Sydney's housing market may have bottomed out after experiencing its sharpest downturn on record.
Although unit prices had declined for four consecutive quarters, they rebounded in the first three months of 2023.
Melbourne's housing market remains stable, indicating that house prices may have hit or approached the bottom of the price cycle.
While there were only minor fluctuations this quarter, house prices have remained steady for the past six months, pointing to a balance between buyers and sellers.
However, Melbourne unit prices continued their decline in the March quarter, marking the third consecutive quarter of decrease.
Brisbane's housing market slowdown showed signs of abating, as prices stabilised over the last quarter.
House prices remained flat, marking the best performance since mid-2022, while unit prices stabilized to record a marginal loss.
Adelaide's house prices hit an all-time high in the 11th consecutive quarter of growth.
Homeowners have been seeing new record prices every quarter for almost three years.
However, despite this prolonged increase, the quarterly price growth rate is currently at its slowest since the mid-2020 decline.
The brief stability in Canberra's housing market has given way to a sharper decline in house prices in the March quarter.
Nevertheless, the current quarterly decline rate is approximately three times slower than the steepest drop observed in September 2022, indicating that the downward trend may be losing steam.
Perth's housing market saw house prices reach a new peak in the March quarter.
However, the pace of growth slowed significantly, with quarterly increases more than halving compared to the previous quarter.
Meanwhile, unit prices fell in the March quarter, reversing all of the gains seen in the previous quarter.
Hobart's housing market downturn showed signs of easing in the March quarter, as house prices fell at a slower rate than the record pace seen in the previous quarter.
However, this still marks the fourth consecutive quarter of decline, making it the longest period of falling house prices in the city's history.
Darwin's housing market downturn intensified in the March quarter, as house prices fell at the fastest pace since mid-2020, wiping out all the growth seen in the previous quarter.
Similarly, unit prices declined at an accelerated rate, reversing the gains made in the previous quarter.