Home Insights PropTrack Home Price Index – November 2022

PropTrack Home Price Index – November 2022

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PropTrack’s Home Price Index shows that the decline in national home prices has accelerated from a moderate pace of decline in October, with national home prices falling 0.16% in November.

Australian house prices are now 3.81% below their peak.

Prices fell in all capitals except Adelaide, with Darwin (-0.49%) and Melbourne (-0.33%) recording the biggest declines.

Sydney (-0.14%) eased the pace of price declines, but house prices have fallen sustainably since March, experiencing the steepest drop of any market.

Sydney prices are now 6.44% below Nov 2021 levels.d

Download the Complete PropTrack Home Price Index – November 2022

The price decline deepened in most parts of the country in November, especially in key markets like Sydney.Photo: Getty


House prices fell slightly in November in Brisbane (-0.04%), Perth (-0.04%) and Canberra (-0.02%).

South Australia continues to buck the recession, with Adelaide prices rising 0.25% to a new peak. South Australia’s house prices hit a new price peak in November, rising 0.30% in the past year as he recorded its strongest growth pace in November .

Regionally, QLD saw the biggest price decline (-0.49%).

Adelaide and Brisbane continue to be the best performing capital cities over the past year.

Recession deepens as interest rates continue to rise

The pace of house price declines accelerated in November after a modest decline in October.

Home prices in the country have fallen for the eighth straight month, with the fastest interest rate tightening cycle since the 1990s weighing on home prices in most parts of the country.

The pace of the price decline remains significantly slower than the larger declines seen in June and July when interest rates first started rising, but the decline continues to deepen and prices across the country are now close to down 3.81% from its peak in .

Going forward, borrowing costs will continue to rise as additional interest rate hikes are imminent, further reducing maximum borrowing capacity and weighing on prices.

A significant drop in borrowing capacity means further price declines.

However, the downward pressure from rising interest rates will be driven by positive demand drivers resulting from tighter rental markets and pressure on rental prices, rebounding international migration, accelerating wage growth, and sustained long-term housing pressures. It may be canceled.

Capital below price levels in November 2021

House prices fell 0.16% across the capital in November and are now below the levels of a year ago.

By contrast, the pace of price declines in rural areas continues to slow, although rural areas also registered a monthly decline of 0.16% in November, although prices rose 3.89% from the levels seen in November 2021. remains.

In the Capital, prices have fallen by 3.09% over the past year.

Demand for more affordable neighborhoods and larger homes will provide downward support, with rural areas outperforming metropolitan areas in 2022.

Additionally, conditions remain tough for local buyers, with the number of properties for sale still well below pre-pandemic levels, leaving local buyers with fewer options and less bargaining power.

This is another reason why prices have fallen slower in the region than in the capital.

Buyer choice has improved in most capitals, notably Sydney and Melbourne, where total listings have surpassed their ten-year average in recent months and competition has eased.

Comparing available inventory in the market to pre-pandemic averages, it is clear that buyers in the region have far fewer options.

This is especially true for regional SAs. This is the best-performing region in the past year, with home prices up 15.92% since November 2021, still hitting all-time highs.

Adelaide hits new peak, Darwin leads price decline

Sydney house prices fell again in November (-0.14%) after a sharp decline in recent months, while Melbourne house price declines accelerated in November, falling 0.33%.

Prices in Sydney are now 6.44% below the level of a year ago, while prices in Melbourne are down 4.49%. Prices have fallen 6.28% in Sydney and 4.75% in Melbourne from their peak earlier this year.

Darwin (-0.49%) led price declines across the capital in November. In Canberra, prices are 0.54% below the level of a year ago.

Hobart prices fell 0.27% in November, 2.92% below their April peak. However, the price remains he 1.06% higher than last November’s level.

Adelaide and Brisbane continue to see a moderate pace of price declines and are among the strongest capital markets, benefiting from many of the same lifestyle and affordability trends that have boosted the region since the outbreak of the pandemic. continue.

Adelaide was the best performing capital city market over the past year (up 12.63%), with prices hitting a new peak in November. Brisbane house prices are up 4.72% year-on-year, despite a slight drop (-0.04%) seen in November.

Perth is also relatively affordable, with home prices rising 4.13% over the past year, outperforming other capital cities after falling just 0.57% from its peak in August.

The regional SA continues to buck the decline with prices rising 0.30% to reach a new peak in November. Regionally, Queensland saw the most price declines (-0.49%).

Home prices fell 0.17% in November, units fell slightly by 0.08%, and single-family homes accelerated their decline against rapidly rising interest rates.

Affordability constraints, shrinking budgets, strong rent growth, and value units on offer have all helped prevent demand from apartment buyers from declining too quickly.

Changing tastes and relative affordability due to the pandemic will continue to affect prices

The regions of South Africa, south-east Queensland and rural New South Wales topped the country with growth of nearly 20% in some regions over the past year.

Not surprisingly, South Australia is home to half of the top 10 fastest growing regions.

These markets continue to benefit from the changing tastes, relative affordability advantage, and changes in migration caused by the pandemic.

As interest rates rose rapidly, not only did mortgage repayment costs skyrocket, but borrowing capacity was also affected.

With interest rates rising at a fast pace, potential buyer demand and home prices are holding up in a relatively affordable market.

Looking across the capital, it is clear that the more affordable areas and the peri-urban areas perform better. With an increased willingness to pay for larger homes and a reduced need to commute, these neighborhoods have performed strongly since the outbreak of the pandemic.

Outlook

With rising interest rates, the housing market has rebounded sharply from last year’s extreme growth and continues to be at the center of the decline in home prices.

After peaking in March 2022, domestic prices fell for eight consecutive months, fell another 0.16% in November and are now 3.81% below their peak. However, the pace of price declines is still significantly slower than the larger declines seen in his June and July when rates first started to rise.

Domestic annual price growth is now at -1.08%, the slowest pace since August 2019, and the fastest interest rate tightening cycle since the 1990s is putting pressure on house prices in most parts of the country.

The cash rate is now stuck at 2.85%, with a substantial tightening of 275 basis points so far, reducing maximum borrowing capacity by more than 20%.

Combined prices in the capital are below the levels of a year ago, as are prices in Sydney, Melbourne and Canberra. These three markets have continued to lead peak-to-trough declines so far despite not leading the November price decline.

Rising interest rates continue to be the main driver of falling home prices. It is almost certain that interest rates will rise another 25bp in December and the cash rate will exceed his 3%.

With additional interest rate hikes on the horizon, borrowing costs will continue to rise, further reducing maximum borrowing capacity and shrinking buyer budgets.

A significant drop in borrowing capacity means further price declines. It will take time for interest rate rises to fully affect prices, so they may continue to fall throughout the year as interest rates continue to rise.

Once interest rates peak in 2023, prices may stabilize as interest rate uncertainty diminishes, easing price declines.

The Reserve Bank’s rapid interest rate hike has had a major impact on the housing market.Photo: Getty


However, the downward pressure from higher interest rates will be offset to some extent by a positive demand effect from tighter rental markets and pressure on rental prices, a rebound in foreign immigration, wage growth and, over the long term, housing pressures. will

The regional market, like Brisbane and Adelaide, has seen a slowdown in price declines since the onset of the pandemic, fueled by shifting lifestyle priorities, migration trends and affordability advantages.

So far, these changes have continued to moderate price declines, but a reversal of the pandemic-induced shift in taste poses risks to these markets in the long term.

Higher borrowing costs are a price headwind, but the Australian economy has so far weathered a significant rise in interest rates and unemployment, at a 50-year low, is starting to boost wage growth.

Sustained wage growth should eventually restore some borrowing capacity.

Increased investor activity and immigration could support markets for large cities and units, which are currently undervalued relative to other property types.

However, the path of interest rates and how the economy ultimately responds to tightening policy will remain a key determinant of market conditions and the pace and depth of price declines.

* PropTrack Home Price Index It measures monthly changes in residential property prices across Australia and provides a current view of property market performance and trends. The PropTrack Home Price Index uses a hybrid methodology that combines repeat sales and hedonic regression. Repeat sales match resales of the same property, while hedonic regression estimates values ​​based on those of similar properties. The hybrid model matches two of his properties of the same type within the same Australian Bureau of Statistics Statistical Area 1 (SA1) region and allows control for differences in property characteristics like hedonic regression. The PropTrack Home Price Index is a revised index whose entire historical history is updated monthly with current transaction information.

** This report is realestate.com.au Internal data and data provided by third parties, including state government agencies. At the time of publication. This report provides general information only and is not intended to constitute advice. When citing or referencing this report (or the findings or data contained therein) in a publication, please refer to the report as “PropTrack Home Price Index Report – September 2022”. look report Copyright and legal disclaimers.

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