The likelihood that rate hikes have ended and rising prices, has seen buyers return to the market according to a new report.
The PRD Australian Economic and Property Report 2023 found that confidence has returned to the property market as prices have bottomed out and started to increase.
PRD Chief Economist, Dr Diaswati Mardiasmo said buyers are back according to the ‘Time to Buy a Dwelling Index’, although many are at different levels and speeds.
“This is different to 12 months prior, when the index was quite divergent on a state-by-state basis, with mostly buyers retracting from the market,” Dr Mardiasmo said.
“Across Australia, on average, the Time to Buy a Dwelling Index increased 3.4 per cent annually and 11.7 per cent quarterly.”
She said in the past 12 months buyers in Tasmania were the most active, with the Time to Buy a Dwelling Index increasing 25.9 per cent, followed by QLD (8.9 per cent) and WA (6.1 per cent).
However, in the three months to June 2023, buyers in QLD led the way, increasing 20.1 per cent, followed by WA and Tasmania.
The report found that all capital city markets were at the bottom or turning up into another growth phase.
“Australia’s property prices have entered a new phase after a period of high growth between post-COVID-19 and the RBA’s cash rate hikes,” Dr Mardiasmo said.
“Although there is an overall trend of a softer property price nationally, a closer inspection of local markets gave mixed results.”
She said this is due to the layer of factors that impact the balance of supply and demand in each market.
“Higher cash rate and various cost-of-living pressures have created abnormal household budgets and financial situations, and a more varied decision-making pattern for buyers and sellers,” Dr Mardiasmo said.
According to Dr Mardiasmo, Greater Sydney and Melbourne markets have fluctuated heavily in the past 12 months since the May 2022 cash rate hikes.
While Greater Brisbane and Greater Perth are the most resilient markets.
Regional South Australia recorded the lowest median house price at the start of 2023 but has had the highest median house price growth in the past six months, indicating it is a more resilient market.
The report found that NSW had the highest residential property spending at $181.4 billion, with property sales across all price bands up double digits.
A similar trend was also seen in QLD, although higher-priced stock (valued at $2 million and above) led the recovery.
In Victoria, lower-priced properties (valued below $500,000) saw the greatest increase in the June quarter (up by 37.2 per cent) due to high-development areas in Melbourne.
According to the report, Australia’s property market has performed on par with other countries.
Compared to the rest of the world, Australia’s median house price sits in the middle range, on par with the United Kingdom, but more expensive than France and Japan.
However, prices are more affordable than in New Zealand, USA and Canada.
The report also found that first-home buyers have continued to retract in the 12 months to the March quarter of 2023.
The largest decline was in Victoria (down 35 per cent), Western Australia (down 30.9 per cent) and NSW (down 27 per cent).
Dr Mardiasmo said the fact that the Reserve Bank of Australia looked to be hitting the peak cash rate, had added confidence to the market.
“At present, our stable cash rate has created a ray of hope and a steadier “base” to our layer of property factors,” she said.
“This has a multiplier effect on the household budget and individual finances, as well as some business costs.”
“However, there are still multiple layers at play, with a different impact to a particular local market.”
She said that despite the slowdown in rate hikes, overall confidence is down on where it was during the boom times.
The report also noted that the lag in construction times is adding to the shortage of houses across the country.
Along with the fact that wage growth continues to lag behind the current level of inflation.