What was different about our housing markets in 2023?
As we close out 2023, the Australian property market looks significantly different from 2022 - we've defied all the naysayers and property pessimists and experienced eleven consecutive months of national price increases.
Clearly, this strong price growth is the biggest difference to the markets of 2022 when rising interest rates slowed down buying and selling activities.
And while 2022 finished with many economists anticipating the downward trend to persist into 2023, and some even predicted a faster decline, clearly the opposite happened.
According to the latest PropTrack Home Price Index, property prices have consistently risen throughout the year, rebounding from the 2022 downturn and reaching record highs in various markets.
And as we finish the year the pace of growth has slowed down.
This is attributed to more properties entering the market, providing buyers with increased choices and reducing competition.
Despite this, affordability remains a concern as prices continue to stay high.
Ms Eleanor Creagh, Senior Economist PropTrack recently looked at the milestones the property market achieved in 2023, and how this year was different to last.
In her commentary said:
"Although growth has slowed in recent months, prices are still rising at a much faster pace than in 2022.
In the year to November 2022 national home prices had slipped 1.23% from their previous peak in March 2022.
This year has been very different and in the year to November 2023 national prices are up 5.42%.
That’s despite interest rates being much higher than in 2022 after climbing in February, March, May, June and November."
According to Ms Creagh, that’s been another change relative to last year, with interest rates climbing a further 125 basis points, maximum borrowing capacities have now reduced by more than 30%, whilst mortgage servicing costs have climbed higher.
Ms Creagh further said:
"But strong housing demand, buoyed by record net overseas migration, tight rental markets, low unemployment and home equity gains, has worked alongside limited housing stock to offset the impacts of higher interest rates this year."
Australia's population grew by 2.4% in the year to 30 June 2023, according to the latest figures released by the Australian Bureau of Statistics (ABS).
Net overseas migration accounted for 83% of growth and added 518,100 people to our population in the year to June 2023.
Ms Creagh commented:
"A shortage of available rentals and a slowdown in the completion of new homes against the backdrop of pre-existing housing supply issues, has meant that the mismatch between housing supply and demand has worsened in 2023 contributing to higher rents and house prices.
This housing shortfall is one reason why home prices have defined the impact of continued interest rate rises and the slowing economy.
The government hopes to bring net migration down to 250,000 by 2025 - which it will largely achieve by introducing stricter rules for international student visas."
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – February 2024
- Also read:Sydney housing market update | February 2024
- Also read:Unit price growth to outpace houses as affordability issues continue to bite
- Also read:Melbourne housing market update | February 2024
- Also read:CoreLogic National housing market update | February 2024
According to PropTrack, compared to the same period last year vacancy rates have declined in almost every capital city and regional counterpart.
The national rental vacancy rate is currently sitting just above 1%, highlighting the critical shortage of available rentals.
Ms Creagh said that vacancy rates are at or very close to historic lows in almost every capital city and low vacancy continues to drive strong rental price growth.
Another factor likely buoying homebuying demand, incentivising those with the means to purchase sooner.
According to PropTrack, in November 2023 preliminary sales increased 16% relative to the same period in 2022.
This has been led by a strong increase in Sydney where preliminary monthly sales were 27% higher than levels seen in November 2022.
Ms Creagh also commented that properties are also taking less time to sell with the stronger homebuying demand environment in play.
She further said:
"The median number of days properties are advertised on realestate.com.au has fallen from 40 days a year ago to 36 days, despite the increase in stock for sale relative to November 2022. In each of the major capital cities, properties are now selling faster than they were a year ago."
PropTrack's data highlighted that although the number of first-home buyers purchasing is well below the highs experienced during the pandemic, first-home buyer activity has lifted throughout 2023 and is above its long-term average.
Ms Creagh explained that the share of new lending to first-home buyers in 2023 has consistently held above levels seen in 2022, currently comprising an 18.6% share.
The number of new first-home buyer loans has also increased relative to the same period in 2022, with the ABS lending indicators data showing a 6.8% increase in the number of new first-home buyer loans in October 2023 compared to October 2022.
Enquiry from those identifying as first-home buyers on properties listed for sale on realestate.com.au has also increased, climbing 10% year-on-year across the capital cities in November 2023.
She further explained:
"Challenging conditions in rental markets right around the country have likely incentivised some first time buyers - with the means to do so - to purchase sooner than they otherwise would have.
With rental markets expected to remain tight this is likely to continue in 2024, especially as mortgage rates stabilise."
PropTrack also noted that activity from investors has also stabilised with investor lending having climbed off historic lows seen through the pandemic to comprising over a third of new credit, currently the highest share since 2017.
Ms Creagh said:
"Although we continue to see a heightened volume of listings of investor-owned properties - indicating some investors are exiting the market - we have also seen new investors enter the market with an increase in investor-owned properties listed for rent and an increase in the number of new investor loans.
Enquiry from those identifying as investors on properties listed for sale on realestate.com.au has also increased, climbing 15% year-on-year across the capital cities in November 2023."