Successive interest rate rises, surging inflation, low consumer sentiment and deteriorating affordability drove a shift in Australia’s 2022 housing market performance, CoreLogic’s report reveals.
When summing up the year that was, CoreLogic Head of Research Eliza Owen highlighted two distinct characteristics of capital growth trends in 2022, with the first being that not all housing markets were uniformly impacted by market headwinds.
“More expensive markets tended to see sharper declines, while the more affordable segment of the market where buyers typically do not have to extend themselves as much to buy into, saw greater resilience to increases in interest rates,” she said.
“The second trend is the pace of decline has been slowing on a broad basis since September. While this may be seen as a positive by some, there is still a risk of the decline re-accelerating in the year ahead.”
CoreLogic Economist, Kaytlin Ezzy, added a prominent theme was the Australian property market’s seismic shift in conditions in the space of 12 months.
Over the year to November, national housing values fell -3.2%, driven by an annual decline in capital city dwelling values of -5.2%, while regional dwelling values rose by 3.3% over the same period.
The estimated total value of residential real estate decreased from $9.6 trillion in December 2021 to $9.4 trillion in November 2022. Estimated annual sales declined -13.3% compared to the year to November 2021, with approximately 535,000 homes sold nationally.
Market Outlook – 2023 crystal ball
One of the distinctive features of capital growth in 2022 was a slowdown in the pace of decline toward the end of the year. National value falls eased to -1.0% in November, following the steep monthly falls of -1.6% in August.
Ms Owen said although declines have been slowing, suggesting we may have moved past the peak home value declines, further rate rises are anticipated in the early months of 2023, which could cause the rate of decline to pick up speed once more.
“As we move into 2023, there continues to be a mix of headwinds and tailwinds for housing market performance,” she said.
“With expectations that the bulk of the rate tightening cycle occurred in 2022, housing value declines could find a floor in the new year. However, the extent of the floor in values could be further weighed down by mortgage serviceability risks, particularly for those rolling out of record-low fixed mortgage rates through the second half of year.
“But unemployment levels remain at historic lows, which plays a role in serviceability, helping to keep a lid on mortgage arrears. On top of that, strong rental markets and improving affordability from the point of falling values, may entice investors and first home buyers into the market, underpinning a recovery in buyer activity in the second half of 2023, when the cash rate stabilises.”
The above is extracted from the CoreLogic yearly “Best of the Best” report. We did not include the report as a whole as it is primarily focused on capital cities, our interest is regional and national. Read the full report HERE