How is the spring season shaping up for Australia's housing markets?
Well, the property markets have slowed as interest rates have risen, and apart from falling consumer confidence and concerns about inflation, one of the big factors driving property prices lower is prospective buyers’ reduced borrowing capacity.
"Activity is slowing as would-be buyers face rising mortgage rates and shrinking budgets, on top of concerns about further price falls and uncertainty around future borrowing costs.
Consumer confidence has fallen to historically low levels as cost-of-living has surged.
Australians have become more pessimistic about the country’s economic prospects.
These factors have weighed on buyer demand, and as demand has slipped, auction clearance rates and sales volumes have fallen from their high levels recorded earlier in the year.
But with all of that said, spring has sprung, bringing with it what is typically a busier time of year for property markets around the country."
One of the big changes from last year is the amount of choice for buyers, which has continued to improve.
In fact, nationally, the total number of properties listed for sale increased 3.9% month-on-month in August.
Ms Creagh explained:
"The recent strength in new listings is not being matched with the same strength in buyer demand and slowing transaction volumes along with longer sales times are seeing more available stock on market.
The total number of properties actively listed for sale is up 13.7% compared to a year ago – the largest year-on-year increase since 2010.
They have regained the upper hand much quicker."
On a per-listing basis, demand from potential buyers has eased as the pace of new listings remains historically strong against a backdrop of moderating interest to buy in recent months.
And yet, demand measures still remain above pre-Covid levels.
Ms Creagh explained further:
"Nationally, the number of potential buyers per listing increased 2% month-on-month in August, with activity picking up as the spring selling season begins.
However, the number of potential buyers per listing is 10% lower than levels seen in the same period last year.
This is shifting the balance back in favour of buyers.
There’s a lot more choice and less competition, which could create opportunities for some."
This has brought a much healthier balance to the market.
The median number of days a property was listed on realestate.com.au in August 2022 was 44 days, up from 42 days in July, with properties selling slower as the market has cooled.
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Ms Creagh said:
"Compared to August last year, across the capital cities, days on site have climbed the most in Sydney, Melbourne, and Hobart.
It makes sense as these markets have slowed fastest relative to last year, with both Sydney and Melbourne leading price declines to date.
Compared to July, days on site climbed most in Brisbane, with properties taking 10 days longer to sell."
A similar trend is being reflected in the preliminary weekly sales data.
Compared to the same period to date last year, sales volumes have fallen most in Hobart and Sydney.
In fact, heading into spring, preliminary sales were 14% lower in August than the same time last year, but almost every capital city has seen an increase in sales volumes month-on-month.
The exceptions were Brisbane, Hobart, and Darwin, where sales dropped off in August compared to July.
Actually, the Brisbane market had been a relative stronghold, but activity has quickly slowed in recent months, and sales volumes are now down 9% compared to the same period last year.
Auction numbers have picked up, as is typically the case this time of year.
This week, auction numbers are set to be the highest of any week in the past three months.
Victoria is set to see the most homes go under the hammer, with more than 1000 auctions scheduled – the state's first Super Saturday since June.
Ms Creagh commented:
"Clearance rates have also picked up in recent weeks, sitting at a little more than 50% in both Sydney and Melbourne.
Although, that’s well down from what we were seeing earlier in the year, or in spring last year.
The reason for these healthy clearance rates could be that after several months of price falls, vendor price expectations have reset somewhat.
On the other hand, buyers are also aware that with rates continuing to rise borrowing power is going to be further constrained, and so some might be taking advantage of the increased choice available now and moving ahead with their purchasing plans."
Ms Creagh explained her thoughts on what's ahead:
"The combination of the cash rate moving sharply higher, mortgage rates rising, and the expectation of further price falls have weighed on buyer demand.
It is clearly contributing to slowing activity.
However, buyer demand is still above pre-pandemic levels and there has been a pickup in activity as spring kicks off, albeit slower than last year.
Further rate hikes will mean higher repayments for those with a mortgage already.
A further reduction in borrowing capacity for would-be buyers will continue to weigh on prices.
In addition, uncertainties remain about where interest rates will land – which will likely see some Australians delaying their decisions to buy and/or sell."