Midyear state of affairs: A closer look at the country’s markets

“It’s obvious that affordability constraints, as well as changing monetary policy, has taken some of the heat out of property markets – especially in our more expensive locations – with members reporting fewer active buyers,” PIPA chair Nicola McDougall stated. 

But despite softening market trends, Ms McDougall said property markets remain sound, with experienced home buyers and investors understanding the central bank’s need to increase interest rates from their emergency pandemic-induced lows.  

“[With] more listings available and fewer buyers, it’s clear that the current changing market conditions are presenting a plethora of opportunities for long-term homebuyers and investors,” she stated. 

For a state-by-state play of where markets currently stand and what their future trajectory is, read below: 

NSW

Director of BFP Property Ben Plohl noted that there is a “clear transition” across Sydney’s marketplace, as dropping price guides and auctions being passed become the new norm in the harbour city. 

He also noted the varying trend in sale prices for different property segments in the NSW capital. “A-grade properties are still moving and for good prices, however, we are seeing a significant slowdown in B- and C-grade stock,” he stated. 

As home buyers take the driver’s seat in the new market environment, Mr Plohl also highlighted that there is now a disparity between vendor expectations and what buyers are offering in some campaigns. 

And while the average number of active buyers at some open homes has declined, he said that buyers looking for golden opportunities are now appearing more frequently on the local market scene.

He also reported that the auction market is seeing mixed results. “We have witnessed a range of different auction results over the past couple of weeks with some auctions struggling to muster up a single registered bidder, while others are seeming some 10 to 15 registered bidders,” he stated. 

Overall, Mr Plohl said that presently, the market is displaying no distinct pattern, with demand being affected by different factors.   

“Consumer confidence has taken a battering due to the negative news headlines, global unrest, and the rapid increase in the cost of living. No doubt this is and will continue to dampen buyers’ appetites when buying real estate and the market will continue to flat line and be quite patchy,” he forecast. 

He also projected that the trajectory of the cash rate in the coming months would impact the market’s direction. 

Victoria 

Cate Bakos from Cate Bakos Property said the recent market events seen to impact Victoria’s rate of capital growth did not turn out as trend-changing as they were expected to be. 

“The election jitters and interest rate increase didn’t do much to change Victoria’s rate of capital growth – we’ve sustained yet another very static month for both our capital city and regional market with our capital city exhibiting -0.7 per cent price movement and the combined regions exhibiting +0.4 per cent,” the local buyer’s advocate stated. 

She said the monthly results were a welcome reprieve from the negative narratives surrounding the real estate market. “This is a pleasant surprise given the media doom and gloom, and the mere fact that buyers do typically opt to sit on their hands in the lead-up to a federal election,” she said. 

Speaking on the election results, Ms Bakos anticipates that the Australian Labour Party’s planned shared-equity scheme will not have a “dramatic” impact on the general market. 

But she noted that prominent economic trends, such as rising inflationary pressures and the increased cost of living, would serve as headwinds to consumer sentiment. 

Ms Bakos also expects Victoria to solidify its status as a landlord’s market for the rest of the year. 

“With onerous rental reforms rolling out and a general supply/demand imbalance in favour of rental providers, we expect that strengthening vacancy rates and increasing rents will be a hallmark of 2022 and beyond,” she forecast. 

Queensland 

South-East Queensland – namely Brisbane – is undergoing a significant change in buyer behaviour, according to Meighan Wells, the director and principal for Property Pursuit. 

The local expert said fear-of-missing-out (FOMO) sentiment, which has fuelled demand in the last 17 months, had been alarming. 

“People making significant financial and personal decisions that are overwhelmingly based on an extreme fear of missing out is fundamentally flawed to the degree of bordering on insanity,” expressing her relief that the property mania in the region had dissipated. 

She said that a combination of low-interest rates, strong net migration, affordability, and a desire for a change in lifestyle have been key factors for the strong growth in dwelling value in the city. 

As buyers take a more relaxed stance when it comes to buying, the local expert anticipates market conditions softening in the coming months. 

South Australia 

South Australia (namely Adelaide) has become a popular prospect among investors due to its strong performance in recent months, according to Adam Hindmarch, the director and principal strategist of Prospa Property Advisory. 

“Adelaide is now firmly on the radar for eastern seaboard investors, who are flocking to our city in droves – and driving up local property prices according to many locals!” he stated. 

“Real estate agents across Adelaide are reporting that it is not uncommon for more than 50 per cent of enquiries on a listing to come from interstate investors and buyer groups. The majority of whom being from Sydney and Melbourne, where prices are continuing to flatten, and investors are looking for value in other markets,” he added.

He said that while the recent rate hikes had dampened the urgency within the South Australian capital, its impact was not strong enough to “slow things down”. 

“We do have to consider that the last time we saw an interest rate rise was back in 2010, meaning there is a generation of Australian homeowners who have never experienced an interest rate rise and maybe a little rattled by this,” he explained. 

The local expert underlined that affordability continues to be Adelaide’s biggest drawcard. 

“Affordability is a strong motivator for many investors. In the northern suburbs, you can still buy a standalone house in the $300,000s! In the southern suburbs there can also ‘bargains’ in the low $400,000s,” he commented. 

In addition to the region’s affordability, Mr Hindmarch also said that the city’s rental market – which currently enjoys “through the roof” demand and low vacancy rates –  also makes Adelaide attractive to potential investors. 

Western Australia 

While the recent rate hikes will have a significant impact on high-priced east coast cities, Matthew Hughes, the managing director of Capital Property Advisory, said that this wouldn’t be the scene that will unfold in Perth. 

“Historically, Perth residential prices have had a unique relationship with higher interest rates and it is not unusual for Perth to be counter-cyclical to the eastern markets,” he explained.  

The local expert cited the events that unfolded more than two decades ago to support his observation. 

“The Reserve Bank cut the cash rate to a then relatively low 4.25 per cent in December 2001, amid ongoing global uncertainty following the 9/11 attacks. However, this rate didn’t last long. By May 2002, the rate increased to 4.5 per cent and kept increasing until early 2008 when it peaked at 7.25 per cent, just before the GFC.

“And what happened to Perth property prices during this time? They rose significantly. Perth’s median house price grew sharply each year until 2008, despite the higher rates and subsequent increases,” he stated. 

He also cited Perth’s relative affordability compared to its eastern counterpart as its main advantage over bigger capital cities. 

“Many households in Melbourne and Sydney are spending around 40 per cent of their disposable income on mortgage repayments, according to data from the Real Estate Institute of Australia. Households in Perth, however, are spending circa 26 per cent on meeting loan repayments,” Mr Hughes stated.

Looking forward, he expects that the persistently low supply in both the rental and sales markets will often lead to upward pressure on property values.

“Supply chain constraints and labour shortages have also dampened the development pipeline, making it unlikely there will be a significant rise in housing stock any time soon,” he added. 

Mr Hughes also forecasts that border openings will also weigh on the market, with interstate and international arrivals expected to bolster demand. 

Tasmania 

Simon Pressley, the managing director of Propertyology, said that Tasmania’s three biggest capitals notched significant rates of capital gains in recent history due to favourable market conditions. 

“Tasmania’s three largest markets produced outstanding rates of capital growth over the past three years (Hobart 60 per cent, Launceston 80 per cent, and Burnie 70 per cent),” Mr Pressley said. 

While he does not expect the rate of capital growth to reach the same lofty levels in the coming months, he said: “The pressure will continue to be more than normal and double-digit rates of capital growth are therefore likely. And the incredible upward pressure on rents is not going away any time soon.” 

The property expert also forecasts the Tasmanian economy’s continued strength to put a floor on property values. 

“The Tasmanian economy has been the nation’s best for four consecutive years and, just this month, produced an all-time record low unemployment rate.

“Meanwhile, household finances have never been stronger due to record high values in both home equity and liquidity (huge cash reserves in mortgage offsets and redraws,” Mr Pressley stated. 

Looking forward, he predicts that home upgraders, first home buyers, and investors will play the role of active market purchasers in the foreseeable future.