Sydney is continuing to lead a home price rebound, as property values close in on a return to pandemic boom peaks.
Two interest rate rises in a row appear to have done little to dent the market, particularly in the premium sector — the top quarter of homes by value.
CoreLogic data show a 1.1 per cent rise in national property values over June, backing up May’s 1.2 per cent increase.
Sydney’s 1.7 per cent rise was again the strongest last month, with Brisbane (1.3 per cent), Perth and Adelaide (both 0.9 per cent) the next largest.
Only Hobart (-0.3 per cent) saw prices fall in June.
Regional markets were weaker than most of the capitals, with prices up an average of 0.5 per cent.
Data calculated using a different methodology by rival provider PropTrack shows more modest gains but the same trend, with a 0.6 per cent rise in Sydney prices leading a 0.3 per cent national average gain.
Hobart and Darwin were the only two capital cities to record falling prices, although regional areas were generally also either dropping or posting very modest increases.
Adelaide and Perth are the only two capital cities currently at record prices, but many other locations are getting close.
Overall, regional Tasmania and regional Queensland have seen the biggest capital gains since the outset of the pandemic, both above 50 per cent, while Melbourne has seen the smallest increase of just above 15 per cent.
Home owners reluctant to sell
Carla Peacock knows the strength in Sydney’s premium property market first hand, after recently coming up short in her bid to secure a waterfront apartment in the city’s lower North Shore.
“It’s been hard, it’s been getting harder,” she told ABC News.
“The supply is short, the interest rates haven’t really dampened the interest because there’s less supply on the market.
“I think vendors are pulling out of the market, because they’re scared of their properties not going for the prices they want and, as a result, I think properties are often going for more than they’re actually worth.”
CoreLogic’s research director Tim Lawless said the data backs up Ms Peacock’s gut feeling.
“Through June, the flow of new capital city listings was nearly 10 per cent below the previous five year average and total inventory levels are more than a quarter below average,” he observed.
Matthew Smythe, the principal at Belle Property in Mosman and Neutral Bay, was the agent selling the two-bedroom unit.
He said the market in his area was quite hot.
“We’re finding about two-thirds of our stock is selling before auction date, and then the balance is pretty much around auction date. So it’s still quite good clearance rates for us around here,” he observed.
“I think there’s a little bit more caution out there, but I think people are still willing to stretch, if it’s the right home, and it’s going to last the next 10 years.”
How are property prices defying rising rates?
Mr Smythe said, at the high end of the property market where he operates, many buyers are paying cash and so unaffected by interest rate rises.
“Typically a lot of them are sort of debt free, mortgage free,” he observed.
“So they’ve got the capacity to buy no matter what interest rates do.”
The auctioneer who sold the unit, Clarence White, said interest rates are having an effect on the property market, but current levels are clearly not high enough to deter many buyers.
“Each time the cash rate goes up, it restricts buyer capacity and it also gives them pause for thought as to what’s going to happen next,” he told ABC News.
“So the further they go with interest rate rises, the more they will dent confidence in the real estate market. If they stopped where we currently are, we know that we’ve still got good interest.”
Louis Christopher, a long-time property analyst and managing director of SQM Research, said demand remains strong due to the combination of Australia’s population growing by 500,000 people last year and surging rents continuing to make home ownership look relatively attractive, despite rising rates.
“We’ve definitely had a significant increase in underlying demand, with the population growth right now running at about 2.3 per cent per annum,” he said.
“Then on the supply side, it’s been constrained in terms of new building, as well as existing property owners not willing to sell in this current environment.”
Will property prices keep rising?
Mr Christopher said, in the short-term, the property market is showing resilience in the face of interest rate rises.
Despite some evidence that a growing number of recent buyers are reselling as they struggle with surging mortgage repayments, Mr Christopher said most owners will try everything to hang onto their homes.
“When we actually look at leading indicators, such as distressed sales activity, those numbers are still benign at this point in time,” he said.
“The fixed mortgage resets have already started, it’s already happening as we speak.
“So far, so good, [but] we’re still not quite at the peak of this reset that’s occurring to many of your home borrowers right now.”
However, Mr Lawless said that there could be some early signs of price growth slowing as the most recent interest rate rises increase expectations of how high the RBA will go and how long rates may be elevated.
“Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply,” he noted.
On the supply side, both agent Matthew Smythe and auctioneer Clarence White believe more people will decide to sell during the traditional market peak in spring.
“Don’t panic — if it’s not right, don’t necessarily feel like you have to buy it,” Mr Smythe advised.
“There’ll be more stock coming into spring, that’s the feeling that we’re getting here.”
“If you are looking to sell your property, now is a fantastic time because there’s so little good property on the market,” added Mr White.
“I would be getting on the market before we get a glut.”
While Mr Christopher believes most borrowers can still find ways to hang onto their homes in the face of much higher mortgage repayments, his major concern is what effect the spending cuts they will need to make to do so will have on the economy, which will feed back into home prices.
“The real danger for the housing market is that if we see a significant spike in unemployment over the next six months, similar to what we had, say, in 1990,” he warned.
“That could actually create the conditions for a significant double dip downturn in the housing market, but we’re not there yet.
“If we go into recession, I’ve no doubt we’ll see another fall in housing prices.
“Recession means a rise in unemployment. A rise in unemployment means more defaults in the housing market. And more defaults means housing price falls.”
Source : ABCNews