Where exactly is Australia’s housing market headed?

The research body did note that “housing risks remain skewed to the downside”; however, it added that “there are a few tailwinds that should help to keep this downturn orderly and stave [off] material rise in distressed listings”. 

Here are the tailwinds CoreLogic believes will ensure Australia’s market downturn remains orderly:

1. Tight labour markets

The RBA has claimed that a substantial lift in mortgage defaults would be born from a “double whammy” combination of negative equity and an inability to pay off loans; however, with housing values down 6 per cent across the country at the end of October and tight labour markets leading unemployment to record lows, CoreLogic detailed how neither of these circumstances comes to fruition. 

The research body added that strong labour market conditions and higher incomes possess the potential to “contain any material rise in distressed listings or forced sales”.

2. Net overseas migration, persistently tight rental markets and rising yields 

Pandemic-induced migration lulls have ceased, with international migration climbing at quicker than anticipated rates — the Australian Bureau of Statistics reported in March that international migration in the year to March 2022 had increased Australia’s population by 110,000 people, with this number likely to have risen since. 

This influx of people initially brings increased demand for the rental market, before shifting to support housing demand more broadly across the medium term.

Building on this, a recent report from PropTrack found that rental supply had skidded to its lowest rate since 2003, a factor that CoreLogic believes will entice more investors to enter the market, as well as increased rents, which rose 0.6 per cent in October.

The research body anticipates that once interest rates and housing price stabilises, investment activity is likely to increase.

3. Mortgage buffers

“Household savings and a history of higher-than-required mortgage repayments should also provide a buffer to higher mortgage rates and cost-of-living pressures. The RBA recently noted the median variable mortgage borrower had enough in their offset/redraw accounts to cover 20 months of mortgages (as of August),” said CoreLogic. 

CoreLogic also explained the few silver linings that exist because of the cooling market, the first being that it is now more affordable to enter home ownership. 

Australia’s most expensive city to purchase property in, Sydney, has seen prices fall by approximately $160,000 since reaching its peak, while similarly, prices have fallen $76,000 in Melbourne and $64,000 in Brisbane.

Furthermore, the property data provider highlighted that “buyers are back in the driver’s seat. With advertised stock levels normalising in some regions, along with fewer home sales, prospective buyers have more stock to choose from, less competition from other buys, an improved negotiation position and more time to make their purchasing decision”.

Tags:

• Latest

Share