Yahoo Finance Sydney and Melbourne house prices down again, but not out
We're currently in a two-speed property market.
House price growth in Sydney and Melbourne has continued to decline over the March quarter while at the same time other capitals are recording boom time housing market conditions according to the latest data from Dr. Andrew Wilson's My Housing Market.
Wilson reports that median house prices in Sydney and Melbourne increased by 1.0 per cent and 0.2 per cent respectively over the March quarter.
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These results are the lowest levels of property price growth for Melbourne and Sydney since the June 2020 quarter when COVID-19 lockdowns severely impacted our housing markets.
Despite this, annual house price growth in Melbourne and Sydney remains elevated as a result of the remarkable growth that occurred through 2021.
Sydney houses prices are higher by 19.7 per cent over the year ending the March quarter,
Melbourne annual house price growth was 12.4 per cent.
On the other hand, Brisbane continues to record extraordinary house price growth, rising by 5.4 per cent over the March quarter and up 33.8 per cent over the year – clearly the best result of all the capitals.
“Although Brisbane continues to record strong house price growth, the level of price growth is slowing and is now lower than the exceptional results recorded during 2021,” Wilson said.
Adelaide also reported strong house price growth over the March quarter - up by 3.4 per cent with annual growth of 26.2 per cent. But this market is also slowing, with the March results also well below the quarterly price growth recorded over 2021.
The Perth housing market has reported more solid results over the March quarter, with the median house price increasing by 2.1 per cent for an annual rise of 13.8 per cent.
The smaller capitals recorded generally positive results over the March quarter. Hobart house prices rose by 3.9 per cent and Darwin by 7.1 per cent.
Hobart house prices increased sharply (29.9 per cent) over the year ending the March quarter, while Canberra was higher by 25.3 per cent and Darwin was up 12.8 per cent.
Although Canberra prices increased by 1.9 per cent, it was the lowest local growth reported since the September quarter 2020.
Number of properties listed for sale tells a story
“The change in the number of properties for sale over the past year is a good reflection of the current nature of our housing markets," Wilson said.
"While the number of properties listed for sale are higher by 24.0 per cent and 25.4 per cent in Sydney and Canberra, respectively - offering more choices for buyers - by contrast, the number of homes for sale in Brisbane and Adelaide are lower by 26.4 per cent and 26.7 per cent, respectively, than a year ago - offering fewer choices for buyers and placing upward pressure on prices.”
At the same time, steeply declining affordability - as a result of booming house prices through 2021 - has restricted buyer capacity, resulting in an easing of prices growth in Sydney, Melbourne and Canberra.
However, the significantly lower median house prices in Brisbane and Adelaide markets - compared to Sydney, Melbourne and Canberra - continue to provide the capacity for price increases, buoyed by robust demand well ahead of supply.
This is particularly evident in Brisbane, which is enjoying strong interstate migration.
“Moving forward, house price growth will continue to consolidate over 2022 as rising affordability barriers constrain buyer activity generally – although results are likely to remain positive," Wilson forecast.
"The imminent return of mass international migration will bolster demand, particularly in the Melbourne and Sydney markets, which are experiencing an underlying shortage of housing relative to demand.”
While the prospect for higher interest rates could dampen housing demand in the foreseeable future, the Reserve Bank keeps reminding us that it is prepared to be patient and wait for strong and continuing wages growth before raising official rates.
Rental crisis ahead
Australia is facing a rental crisis as national vacancy rates dip to the lowest point on record, according to Wilson.
Rental vacancy rates keep falling across all cities for both houses and apartments, with most locations around Australia now having a vacancy rate under 2 per cent.
Moving forward, opening the international borders will put additional strain on the already-tight rental market, pushing rents even higher.
“An influx of migrants will likely affect Sydney and Melbourne in particular, as these are the most popular tourist destinations,” Wilson explained.
House rents have risen strongly in all capital cities, led by Canberra (+19.7 per cent over the past year) and Sydney (+15.4 per cent).
“While unit rents have not risen as strongly as houses, apartments in the previously oversupplied Melbourne and Sydney CBD markets are now starting to fill up," Wilson said.
"This will lead to further rental increases, particularly as our international borders open up bringing back tourists and international students.”
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