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Australia’s Shift to a Multi-Speed Property Market

  Australia’s has shifted to a multi-speed property market

It was a record-shattering run.

But CoreLogic’s April home value index shows Australia’s once skyrocketing property price growth has lost momentum, with the 0.6% monthly rate of growth in April 2022 the lowest reading since October 2020.

What’s more, Australia’s two biggest property markets saw their first quarterly decline in prices since the extended lockdowns in mid-to-late 2020.

In Sydney, values fell by 0.5% over the three months to April, taking the median price to $1.12 million. In Melbourne, the median price fell 0.1% to $800,000

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  Australia’s has Shifted to a Multi-Speed Property Market

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But, as the table above shows, while prices are declining in some cities, they’re surging in others.

Consider Brisbane, where prices grew by a stunning 5.7% over the quarter, or Adelaide (5.4%), Canberra (2.7%) and Perth (2.4%).

Then there’s regional Australia.

The combined regions again outperformed the combined capitals, with quarterly growth of 4.7% compared to 1.0%.

As such, it’s increasingly clear that Australia has shifted to a multi-speed property market.

However, even that story hides the great diversity that’s opening up on the suburb level. Because, even in Sydney, there are areas that are still growing strongly. 

Why the divergence?

 The recent property boom has been extraordinary for several reasons – whether that’s because 2021 saw the fastest year-on-year price gain on record or that it occurred during a global pandemic.

But it was also unusual because property values increased almost everywhere in Australia at the same time (albeit at different paces).

Normally, that doesn’t happen. Instead, at any given time, you will usually find a large number of markets where prices are rising and a large number where they’re falling.

That’s because there isn’t one Australian property market, but dozens upon dozens, each at a different stage of the property cycle. So when one location is peaking, another might be flatlining or falling.

In fact, there isn’t ‘one’ Sydney or Melbourne market either – as each larger market can be further broken down based upon:

  • Price point
  • Property type
  • Location

For example, Sydney’s inner-city unit market was hit hard at the onset of the pandemic as home owners, renters and investors stepped away from high-density living and the international border closed.

Meanwhile, lifestyle and coastal locations such as the Northern Beaches, Eastern Suburbs and the Central Coast saw values soar as remote working took off.

However, with Australia’s border back open, investing in a unit in Sydney’s CBD is once again looking like an attractive prospect. At the same time, first home buyers who can’t afford a house in Sydney may consider buying an apartment instead.

What influences property market cycles?

There are four key phases of a property cycle, made up of the:

  • Boom phase – when property prices rise rapidly
  • Downturn phase – when property prices stagnate or fall
  • Stabilisation phase – when property prices remain flat or increase slowly
  • Upturn phase – when property prices begin to increase more rapidly

Each individual property market is driven by many factors including:

  • Population growth
  • Property supply
  • The performance of the local economy
  • Infrastructure, zoning and planning rules

Let’s look at supply as an example.

In April, advertised inventory, at a national level, was tracking almost 30% below the previous five-year average, according to CoreLogic.

However, dig a little deeper, and you’ll find significant differences in the total number of homes available to purchase in each capital city:

  • Brisbane and Adelaide = total advertised inventory was about 40% lower than the previous five-year average
  • Sydney = total advertised inventory was in line with the previous five-year average
  • Melbourne = total advertised inventory was 8.2% higher

Tim Lawless, CoreLogic’s research director, said the higher stock levels in Sydney and Melbourne can be explained by an above-average flow of new listings coming onto the market combined with a drop in buyer demand.

“With higher inventory levels and less competition, buyers are gradually moving back into the driver’s seat. That means more time to deliberate on their purchase decisions and negotiate on price,” he said.

Thinking about buying an investment property? Shore Financial can help. To discuss your home loan options and model different financial scenarios, call us on 1300 416 700, email us on info@shorefinancial.come.au or fill in this online form.






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