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Housing Markets Down in 2022, But Far From Out - December 2022

iBuyNew December 2022 Market Wrap Up

Mixed Bag for Home Prices Over 2022

In 2022, national house prices were predictably lower following the remarkable boom in prices recorded over the previous year. The national capital city house price fell by 4.3% over the year with annual national unit prices similarly lower by 4.2%.

 

Quarterly Median House Prices December 2022

 

Median

Month

3 Month

Year

2 Year

Sydney

$1,423,858

-0.8%

-1.8%

-9.1%

23.8%

Melbourne

$1,029,286

-0.1%

-0.5%

-6.1%

16.9%

Brisbane 

$793,222

-0.6%

-1.7%

3.0%

34.6%

Adelaide

$773,647

0.6%

1.6%

4.3%

31.5%

Perth

$682,277

0.4%

1.5%

6.9%

23.4%

National

$1,007,326

-0.4%

-0.8%

-4.3%

23.2%

Sydney and Melbourne were the main contributors to a lower national house price over 2022, falling by 9.1% and 6.1% respectively. 

The other capitals however recorded positive growth in annual house prices over 2022 with Perth as the top performer with an increase by 6.9%.

Although some capitals reported lower house prices over 2022, all capitals have recorded strong aggregated house price growth over the past two years, with Brisbane the leading performer higher by a remarkable 34.6%.

The 2022 annual decline in national house prices was the first calendar year fall recorded since 2018 when prices were down 5.5%.

Sydney and Melbourne were also the principal contributors to a lower national unit price over 2022, falling by 6.2% and 7.2% respectively. However, annual unit prices in Brisbane and Adelaide rose sharply to be higher by 11.0% and 10.1% over the year – and were also the top performers over the past two years – up by 42.6% and 37.3%.

 

Quarterly Median Unit Prices December 2022

 

Median

Month

3 Month

Year

2 Year

Sydney

$706,097

-1.0%

-2.2%

-6.2%

26.7%

Melbourne

$555,054

-0.7%

-0.5%

-7.2%

15.8%

Brisbane 

$407,607

1.3%

2.1%

11.0%

42.6%

Adelaide

$385,815

-0.5%

1.8%

10.1%

37.3%

Perth

$372,427

1.2%

0.5%

2.3%

18.8%

National

$593,209

-0.6%

-1.2%

-4.2%

23.1%

 

Average Days on Market Rising 

The average days on market rose for all capitals for both houses and units over December following a consistent falling trend reported over previous months. The increase was typical of the seasonal impact of increasingly distracted end-of year housing markets.     

Adelaide continues to report the lowest average days on market of all the capitals for both houses and units, with Brisbane the underperformer.

 

Auction Clearance Rates Steady Over December

Weekend auction markets were steady generally over December despite increasingly distracted housing markets sidelined by the upcoming lengthy holiday period. 

Although Sydney clearance rates were significantly lower compared to the previous month, Adelaide and Brisbane were higher, with Melbourne marginally lower. 

Clearance rates remained below the results recorded over December 2021 although the annual gap for Sydney and Melbourne continues to narrow.

 

Weekend Auction Clearance Rates

Capital

Dec-22

Nov-22

Dec-21

Sydney

63.4%

67.1%

69.4%

Melbourne

62.6%

63.7%

68.4%

Brisbane

55.8%

44.6%

76.9%

Adelaide

75.5%

75.1%

90.0%

 

2022 Ends with Record High Rents Still Rising

2022 has ended with record high rents still rising in most capitals for both houses and units - and with no prospect for sustained rent relief for tenants any time soon given the supply shortage and rising demand from rapidly growing immigration numbers.

Most capitals again reported higher house rents over December with the exception of Perth that reported a steady result.

Most capitals have reported significant rises in annual house rents over 2022 with Brisbane the top performer by 27.3% followed by Perth up 17.0% and Sydney rising by 16.5% over the year.

 

Median Weekly Asking Rents December 2022 (Houses)

 

Rent

Month

Year

Vacancy Rate

Change

Sydney

$675

2.3%

16.5%

1.2%

Melbourne

$500

1.0%

13.0%

0.9%

Brisbane

$560

0.9%

27.3%

0.8%

Adelaide

$520

2.0%

15.6%

0.3%

Perth

$550

0.0%

17.0%

0.3%

 

Sydney remains the most expensive capital for weekly asking house rents at $675 followed by Brisbane at $560, with Melbourne the most affordable - but higher over the month and now at $500.

Capital city house rental vacancy rates for houses remain at record low levels overall, although Sydney rates, while still low, were higher over the month. 

Unit rental markets also again generally reported higher rents over December with Sydney and Melbourne steady.

All capitals have reported extraordinary increases in unit rents over 2022 with Sydney the highest up by 24.5% followed closely by Melbourne up 24.1% and Perth higher by 19.4% over the year.

 

Median Weekly Asking Rents December 2022 (Units)

 

Rent

Month

Year

Vacancy Rate

Change

Sydney

$600

0.0%

24.5%

1.2%

Melbourne

$450

0.0%

24.1%

1.7%

Brisbane

$505

1.0%

15.1%

0.7%

Adelaide

$420

4.7%

11.3%

0.4%

Perth

$495

4.2%

19.4%

0.5%

 

Sydney continued to report the highest weekly unit rent over the month at $600 with Adelaide the most affordable - but higher over December at $420. 

Vacancy rates for units continue at record low levels with Sydney - similar to houses, recording an easing over December.

 

Yet Another Weaker Month for Home Building 

Home building approvals fell again over November 2022, with the underlying trend continuing to decline following the surge recorded in 2021. 

The ABS reports that building approvals for total private sector dwellings were lower by 10.2% over November compared to the previous month and have now fallen for three consecutive months for the first time since the beginning of the covid pandemic in early 2020. 

2022 national building approvals continue to track well below the results of 2021 and have fallen by 18.7% over the first 11 months of 2022 compared to the same period the year before.

Unit approvals fell dramatically over November 2022 to be down by 22.7%, with house approvals also down – falling by 2.5% over the month. Unit approvals declined by 11.1% over 2022 to November compared to the same period in 2021 with houses down steeply by 22.7% over the same year to date comparisons. 

Melbourne remains the clear leader in dwelling approvals over the 11 months ending November 2022 and ahead of Sydney for both houses and units.

All capitals have reported declines in building approvals for houses over the first 11 months of 2022 compared to the same period in 2021. Melbourne and Adelaide however have recorded increased approvals for units over the year to date comparisons, with the other capitals reporting declines.

House Building Costs Steady Over November

House building costs were relatively steady over November following a sustained period of sharply increasing costs, according to the My Housing Market National New House Building Costs Index.

Monthly house building costs have increased by 15.6% over the year to November 2022, which is nonetheless the lowest annual rise reported since October 2021. There appears to be early signs that material and labour costs are finally starting to plateau in response to softening demand, greater supply chain certainty, and higher interest rates perhaps now starting to curb inflation.

Home Loans Down Again Over November

Like building approvals, home lending was lower again over November with the rate of decline increasing compared to the previous month’s result.

The ABS reports that the value of home loans seasonally adjusted (excluding land and alterations and additions) decreased by 3.8% over November compared to the previous month, and is now 24.8% lower than reported over November 2021. 

Home lending over the first 11 months of 2022 is 7.6% lower than recorded over the same period in 2021.

Most states recorded falls in seasonally adjusted owner-occupied home lending over November, with VIC the underperformer falling by 6.0%.

Jobless Rate Low and Steady

The national unemployment rate was steady at the record monthly low 3.4% over November as a consequence of a booming economy with continuing strong demand for labour - despite an unprecedented raft of interest rate increases through 2022.

All capitals continue to record low unemployment rates and well below the results recorded over November 2021. Sydney is now recording the lowest capital city rate with Adelaide and Brisbane the highest each at 3.7%.

RBA Raises Rates Yet Again

The RBA predictably increased official interest rates by 0.25% again in December – the 8th consecutive rise in the current tightening series. The outlook for rates remains fluid and is clearly dependent on upcoming data on inflation, wages and the labour market. 

While most of the market has factored in another RBA rate rise in February at the next meeting, we will be watching the commentary around that announcement and the supporting data to see if we are perhaps now seeing the peak of the rising interest rate cycle.

Comment and Outlook

National capital city house prices were generally lower over 2022 with buyers sidelined as affordability fell as a result of the remarkable price growth recorded through 2021. 

The pent-up demand generated by the covid lockdowns was also largely satisfied adding to reduced buyer activity.

The significant impact of a sustained period of interest rate increases from May - the first official rises in over a decade, also reduced home buyer affordability and clearly reduced consumer confidence - particularly over winter.    

Although national house prices fell over 2022 – the first annual calendar decline since 2018, the rate of decline at 4.1% was relatively modest and lower than the record fall of 5.5% reported over 2018.

Reflecting the remarkable boom of 2021, national house prices remained 23.2% higher over the past two years despite the 2022 decline.

The decline in 2022 house prices primarily reflected falls in Sydney and Melbourne with other capitals generally reporting higher prices over the year.

The unit market recorded similar price growth outcomes to houses over 2022, with Sydney and Melbourne again the clear underperformers, and Brisbane and Adelaide conversely recording strong annual results.

Weekend auction markets were also predictably lower over December as holiday distractions emerged with easing clearance rates in Sydney and Melbourne. However, Brisbane and Adelaide recorded higher results over the month. All capitals continue to report clearance rates well above the mid-year results.      

No relief for tenants over December with rental markets continuing to report record house and unit rents generally and still rising - with record low vacancy rates remarkably still falling. We expect to see rental rates continue to rise through 2023, creating some amazing yield opportunities for savvy investors. 

Tight rental markets reflect the chronic shortage of housing nationally with underlying levels of new builds remaining well below the peak levels of 5 years ago. Dwelling building approvals were yet again lower over November with activity continuing well below the same period in 2021 for both houses and units.

The RBA continued to increase interest rates over December to tackle high inflation, with the outlook dependent on the nature of upcoming local inflation, wages and labour market data. Early signs are emerging however that rates may peak earlier and lower than expected with monthly inflation now falling.     

Although house prices were generally lower over 2022, clear signs emerged over spring indicating a market revival, particularly in Sydney and Melbourne where returns to consistent price growth are likely to emerge sooner rather than later in 2023.

A booming economy with low unemployment and higher wages will support an undersupplied housing market that is driven by an expected surge in migration, placing upward pressure on home prices and rents assisted by a revival of local buyer and seller confidence.

 

Dr Andrew Wilson - Chief Economist My Housing Market  

 

If you'd like to discuss the current property market or better understand how we can assist you with purchasing a new or off-the-plan property, please contact us on 1300 123 463 or book a chat.

Published on 20th of January 2023 by Dr Andrew Wilson
Dr Andrew Wilson
Dr Andrew Wilson

Dr Andrew Wilson is Chief Economist for My Housing Market. He provides comprehensive property market intelligence and holds a PhD and Masters by Research each in Housing Market Economics together with graduate qualifications in Econometrics and Construction Economics. Formally Chief Economist of Domain, he is also one of Australia’s highest profile property market commentators.

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