Housing Markets Hint at Spring Revival - October 2022

The spring selling season is now well advanced, with growing signs over October of an emerging revival in buyer and seller activity.

House Prices Higher over October 

Capital city housing markets continue to report improved outcomes following the winter of discontent, with monthly house prices generally steadying over October.

The latest data from My Housing Market reveals that asking prices for established houses listed for sale in Sydney were steady over October compared to the previous month, which was an improvement on the 0.5% fall recorded over September.

All other capitals reported marginal increases in median house prices over October, with Perth up 0.9%, Melbourne 0.4% and Brisbane higher over the month by 0.3%. Adelaide house prices however increased sharply by 3.0%.,

Adelaide and Brisbane house prices remain significantly higher than recorded over October 2021 – up by 20.9% and 18.8% respectively. Perth annual house prices have increased by 9.1% with Melbourne higher by just 1.7%. Sydney house prices however have fallen by 0.5% compared to October 2021.

Monthly Median Established House Asking Prices - October 2022

Asking prices for established units listed for sale produced positive results across the board over October, with all capitals reporting growth over the month.

Adelaide was again top performer with median house prices increasing by 4.1% followed by Melbourne up 1.5%, Perth 1.4%, Brisbane 0.5% and Sydney where asking prices increased marginally by 0.2% over October.

Adelaide and Brisbane also reported the highest growth in unit prices over the year, higher by 17.5% and 15.2% respectively, followed by Perth 4.9% and Melbourne up just 0.2%. Sydney unit prices however have fallen by 1.4% over the past year.

Monthly Median Established Unit Asking Prices – October 2022

Average Days on Market Still Falling

The average days on market for all capitals for houses fell again over October compared to the previous month, however Sydney and Brisbane reported increases for units in average days on market over the month.

Adelaide remains the top performer for average days on market for both houses and units with Brisbane being the underperformer.

Average Days on Market October 2022

Auction Clearance Rates Higher Again over October

Weekend auction markets continued to rise over October, with clearance rates in all capitals, with the exception of Brisbane, tracking higher compared to the previous month. 

Clearance rates however remained well below the results recorded over October 2021, indicating we are still technically in a “buyers’ market”, although both Sydney and Melbourne markets heading back towards “sellers’ market” territory (which we define as anything above >70% clearance rates).   

Weekend Auction Clearance Rates

Unit Rents Now Surging

Capital city unit rents have continued to outpace the growth of house rents as tenants seek more affordable options to high-priced houses.

House rents were steady again in Sydney, Melbourne and Brisbane over the month with Adelaide lower by 2.0% and Perth higher by 3.8% over the month. 

All capitals however have reported significant rises on house rents over the year ending October with Perth the top performer – higher now by a remarkable 20.0%.

Median Weekly Asking Rents (Houses) October 2022

Sydney remains the most expensive capital for weekly asking house rents at $650 with Melbourne still the most affordable at $490.

Capital city house rental vacancy rates for houses remain at low levels, with Melbourne and Perth falling over the month and Sydney, Brisbane and Adelaide Perth steady.

Unit rents have however continued to rise in all capitals, with Perth higher by 3.9% and Brisbane up 3.1% over the month.

Median Weekly Asking Rents (Units) October 2022

Unit rents have also increased sharply over the past year in all capitals, with Sydney the top performer now higher by 21.5% followed by Melbourne up similarly by 20.9% - making rental yields for investment property owners extremely attractive.

Vacancy rates for units continue at low levels with Melbourne now plunging below 2%, the first time since early 2020 when the pandemic began.

Sydney continues with the highest weekly unit rent at $580 with Adelaide the most affordable at $400.

New Home Building Falls Over September

New home building fell sharply over September following the steep rise recorded over the previous month, with the ABS reporting a 5.4% decrease in seasonally adjusted dwelling building approvals.

The reversal in overall dwelling approvals was due primarily to a 7.8% fall in houses, with approvals for units down by 1.8% over the month.

Dwelling approvals are now 19.7% lower over the first 9 months of 2022 compared to the same period in 2021, with houses down 23.3% and units lower by 12.6%.

The underlying quarterly trend for both house and unit building approvals continues to flatline – with the expectation of growing housing demand as immigration numbers get back to pre-pandemic levels (and soon exceed such levels) a housing shortage looms large.

Melbourne remains the clear leader in dwelling approvals over the 9 months ending September and ahead of Sydney for both houses and units.

All capitals have reported declines in building approvals for houses over the first 9 months of this year 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.

Home Loans Lower Again Over September

Home lending fell sharply over September with the rate of decline accelerating significantly compared to the more moderate August fall.

The ABS reports that the value of home loans seasonally adjusted (excluding land and alterations and additions) decreased by 7.8% over September compared to the previous month and is now 19.7% lower than reported over September 2021. 

Home lending over the first nine months of 2022 is 4.7% lower than recorded over the same period last year.

All states recorded falls in seasonally adjusted home lending over September, with WA the underperformer falling by 12.0%.

Jobless Rate Still Low - and Steady

The national unemployment rate remained steady at the near-record monthly low 3.5% and continues to reflect a booming economy with continuing strong demand for labour.

All capitals continue to record low unemployment rates and well below the results recorded over September 2021. Sydney is now recording the lowest capital city rate with Brisbane and Adelaide the highest at 4.0%.

RBA Raises Rates Again - But by Less

The RBA predictably increased official interest rates over November – the 7th consecutive rise in the current series. Despite the high inflation rate revealed for the September quarter, the RBA decided to again raise rates by just 0.25% with continuing speculation that rates may now peak sooner and lower than expected.

Strong Retail Sales Still Rising

Retail sales continue to rise reflecting a booming economy with record low jobless and rising wages. The latest ABS data revealed that monthly retail sales seasonally adjusted increased again by 0.6% over September to a new record high $35.1bn and remains significantly higher than pre-covid levels. 

Comment and Outlook

Capital city housing markets have continued to exhibit signs of a spring revival in buyer and seller activity following a winter of sharp declines.    

House and unit asking prices again revealed generally modest monthly improvements over October for both houses and units following the positive early signs that emerged over September, with Adelaide reporting sharp monthly price increases.

Supporting improved price outcomes over October, average days on market have fallen over the month in all capitals for houses, and lower also for Melbourne and Adelaide units.

Weekend auction markets again recorded increased buyer and seller activity over October with all capitals with the exception of Brisbane recording higher clearance rates.

Rental markets remain tight for tenants generally, with record low vacancy rates for both units and houses in most capitals. Unit rents continue to surge as tenants gravitate to more affordable options to high-priced houses.

Tight rental markets reflect the chronic shortage of housing nationally with underlying levels of new building remaining well below the peak levels of 5 years ago. Dwelling building approvals were lower over September with activity still well below the same period in 2021.

House building costs continued to increase over September and remain significantly higher than recorded a year ago, acting to further constrain home building activity.

A strong national economy continues to support underlying housing market activity with the jobless rate remaining at record low levels, pushing up wages and supporting robust consumer confidence as evidenced by still-booming retail sales.

Although the RBA has predictably continued to increase interest rates to tackle rising inflation, its latest decision to again raise rates by the baseline 0.25% over November provides some hope that rates may peak earlier and lower than predicted - and act to further enhance consumer confidence.

Regardless, rates remain well below the peaks of a decade ago (and long term average rates in Australia) during the previous rate raising cycle, with numerous offsets such as high savings levels and rising wages acting to moderate the impact of higher rates on consumers and the housing market.

The maturing spring selling season continues to provide signs that recent housing market downturns may be easing, with buyers and sellers gradually re-entering marketplaces.   

The Sydney and Melbourne markets are leading the way back, with rising local demand set to be supported by waves of post-covid international migrants seeking accommodation in housing markets that are currently clearly struggling to house their own populous. 

Dr Andrew Wilson - Chief Economist My Housing Market

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