The Australian property market’s decline continues to accelerate, with the national median dwelling value dropping 1.6% over the last month. This is the fourth consecutive month in negative territory and the largest monthly loss in almost 40 years. Darwin and Regional South Australia are the only markets to resist the downward trend, recording modest monthly price increases.
Despite recent drops, median prices remain well above the lows seen throughout the COVID period. In fact, Melbourne is the only market where prices are not still 15% or more above their COVID trough.
On the rental side, the median national rent rate continues to increase, up 0.8% for the month. This pushes the annual growth in rent rates to double digits (up 10.0%) for the first time since 2016. It has also contributed to the continued recovery of gross rental yields, which now sit at 3.29%.
Key points to note:
Key points to note:
Key points to note:
Source: 5 Things to Know for the 2022 Spring Selling Season (CoreLogic)
Key points to note:
Key points to note:
Source: Monthly Housing Chart Pack (CoreLogic)
Key points to note:
Source: Monthly Housing Chart Pack (CoreLogic)
Key points to note:
3 Trends we are Watching
Regional property prices
Over the last 12 – 18 months, regional areas have really been the star performers of the Australian property market. When the market was on the up, several key regional areas were leading the growth trend. And, when the market started to turn, many regional markets remained in positive territory longer than most capitals.
However, the performance of regional markets is now largely in line with that of the capitals. The decline in dwelling values over August was similar – 1.6% for the combined capitals, and 1.5% for the combined regions. And some regions have seen prices decline by as much as the larger capitals over the last quarter.
Notably, the popular lifestyle locations that led the rise of the regional markets are also leading their fall. Most notably, over the last quarter, dwelling values have fallen 8.0% in the Richmond-Tweed area. There have also been significant losses in the Southern Highlands-Shoalhaven region (down 4.8%) and on Queensland’s Sunshine Coast (down 4.5%).
Rental affordability
While the growth in rental rates is great news for investors, the rate of growth is slowing in several markets. This is being driven by some key market segments, particularly in the capitals.
For example, standalone houses have seen median rents increase by 21.8% over the last year, across the combined capitals. By contrast, the median rent for units in the same areas has only increased by 10.8% over the same period. But this trend is turning, with unit rent increases significantly outpacing increases in house rents over recent months.
While there are several possible reasons for this, many experts believe it suggests houses are becoming unaffordable for many renters. If this trend continues, units may become the better option for investors looking to maximise their regular returns.
Interest Rate Increases
For the fifth consecutive month, the Reserve Bank has chosen to lift the cash rate. Now sitting at 3.35%, this is substantially higher than the record low of 0.1% seen earlier in the year. And, with the RBA continuing to raise concerns about inflation, further increases are expected.
So, the big question remains, how high will rates get? And how quickly will they get there?
While opinions vary, the general consensus is that the cash rate will likely peak at just over 4% by August 2023. This appears to be the assumption many financial market leaders are operating on, though most note that this is uncertain. However things play out, there is sure to be an impact on consumer confidence, borrowing power, and buyer demand.
At Search Party Property, we specialise in developing tailored investment strategies and will work with you to come up with a suitable plan of attack. We also regularly assess your strategy ensuring that it is fit for purpose and delivering the desired results.