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Housing stats - May 2022

Michael Yardney and Dr Andrew Wilson discuss the most recent changes in the Australian property market.

Video transcript

MICHAEL YARDNEY: It's the end of May, the end of autumn, and time to assess how our property markets have performed. And, boy, have the property market had a lot to contend with so far this year-- a pandemic, floods, geopolitical problems, rising interest rates, and a federal election, just to name a few. So to give us the latest housing market statistics, I'm looking forward to our property insider chat for Yahoo Finance with Dr. Andrew Wilson, chief economist of My Housing Market.

ANDREW WILSON: Hello again, Michael. And we have come to the end of the month. And as you alluded, it's been a tumultuous year again. I mean, the big picture is we've come to the end of the great boom cycles, particularly in Melbourne and Sydney. And that's been eased because of high affordability, prices have risen so sharply and to such levels that it's sidelined buyers because they just can't continue to bid up prices without either lower interest rates or higher income. So I guess it's those natural stabilizers that have worked to bring the market back to-- in Melbourne and Sydney-- to level pegging.

And, of course, now there's the-- markets are confronted with higher interest rates, which, of course, does impact affordability, although our housing markets are reasonably well-positioned in the short-term to cope with higher interest rates. The offsets to steady results from Melbourne and Sydney over recent months is that Brisbane and Adelaide are continuing to grow, increase house prices in those markets, however, of course, they're also suffering from affordability constraints, given how strongly prices have grown in those two capitals over the past year.

It has been another month of distractions. May, firstly, we had higher interest rates first time in over 10 years. We've had an interest rate increase, which was announced at the beginning of May. That, of course, doesn't have a real impact in the short-term on affordability, but it certainly does impact confidence, particularly as the reserve bank has told us that they're expecting more rates to come. There was some sobering news on inflation, of course, which, again, affects confidence and the wage increases weren't as high as we're hoped for, particularly from the reserve bank, and that was announced over May as well.

So we've come to the end of the autumn and, no surprise, we've seen a slight fall in Sydney and Melbourne house prices over the month. I'm not sure we're going to see a significant decline in prices. This is unsettling, of course. It will be exacerbated by the winter selling season coming up, which is typically quieter anyway. Adelaide and Brisbane have continued to record higher prices over May compared to April.

However, the rate of growth is definitely declining from those markets as well and Perth is now recording consistent increases in prices on a month to month basis but, of course, Perth is coming from a long way back. It is the most affordable housing market in the country, with the lowest median price. And, of course, that means there's plenty of potential for upside in the Perth market. But I wouldn't be expecting the, sort of, boom results that we've had in the other four capitals over the past year.

MICHAEL YARDNEY: Andrew, clearly there's not just one Sydney property market or Melbourne property market. And what we're finding is that the-- hiring the more expensive properties, which led the boom, are now the ones that are having more difficulty getting buyers. And they're the prices that are falling a little bit more.

ANDREW WILSON: Well, I think in terms of the higher priced segment of the market, Michael, they've been affected by all those distractions over the past two months really. We always see a lower proportion of higher priced properties in the market over April because of Easter, Anzac Day, and school holidays. And, of course, we had those distractions as well from the election campaign in through May.

So, yeah, look, it's a question of the volume or the proportion of higher priced properties in the market. It has been lower, but, look, there's still plenty of buyer activity in that section of the market. And, in fact, there's still plenty of buyer activity generally. But it's a lot more balanced market between the number of buyers and sellers. And I think that's what we've seen in our auction markets as well, Michael, when we look at the comparisons with what's happened with prices.

MICHAEL YARDNEY: Well, last year auction clearance rates were in the [? 80s, ?] they were boom time conditions and prices were booming. What's happened over the last couple of months, if we look at the auction markets, which are actually a great indicator of what's happening on the ground real time rather than what happened a few months ago with some of the sale prices that are coming through?

ANDREW WILSON: Well, absolutely, Michael. Those heady days a year ago of 80%-plus booming clearance rates are well behind us. It's a much more evenly balanced market. All the auction capitals recorded lower clearance rates over May compared to April, and that just continues the trend this year. And as you said, Michael, it's a very good forward indicator of what's generally happening in the housing market. Interestingly, Adelaide still remains the top performer in terms of clearance rates over may, but certainly even the Adelaide market has now popped under 80% and other markets are certainly still perhaps notionally a seller's market, generally. But certainly we're heading-- if the trend continues, I think we will see, not a buyer's market emerging, but a much more balanced market emerging.

MICHAEL YARDNEY: Well, there more stock on the market, there are a few less buys there, so the fear of missing out has disappeared and buyers are taking their time and they're being very selective, we're finding. In particular, A-grade properties, as you said, investment grade properties, A-grade homes are still selling well because there's a shortage of good properties.

ANDREW WILSON: And demand is still-- underlying demand is still strong, Michael, and the prospects of its strengthening with open borders, increased migration, of course, mass migration resuming, those student numbers will fertilize rental markets, and, of course, we've got plenty of incentives now for first-time buyers with those new policies announced. And they'll be keen to get into the market, as they always are, and take advantage of those limited places that are available.

And, of course, investors are also keen to take advantage or to get into those bricks and mortar propositions, given how strongly rents are rising just about across the board at the moment.

MICHAEL YARDNEY: So nothing to be worried about. The market's behaving normally after a significant boom, a once in a generation boom. That was unsustainable. So, therefore, now it's slowing down, but there's no crash on the horizon like some of the negative nellies are suggesting.

ANDREW WILSON: No. And I think even the prospect of the level of-- or the growth in interest rates is not quite set in stone yet. There are a number of challenges for the reserve bank going forward. And they need to be careful as they would realize that they don't slam the brakes on too hard.

MICHAEL YARDNEY: Let's hope our regulators have learned lessons from the past. Thanks for your update on the Australian housing market, Andrew.

ANDREW WILSON: Yes, thanks, Michael, very interesting.

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