Home prices in Australia bounced in February as the housing market downturn lost its momentum amid limited supply and sustained buyer demand, according to the PropTrack Home Price Index.
“In recent months, the housing market correction has lost momentum, with the pace of price falls easing in most markets,” said Eleanor Creagh, PropTrack senior economist and report author. “After revised national home prices recorded a small (0.09%) uplift in January, prices increased a further 0.18% in February 2023.”
All capitals saw prices rebound, except for Hobart (-0.29%), with Adelaide (+0.44%), Sydney (+0.36%), and Melbourne (+0.18%) recording the biggest jumps as tight stock levels have kept competition concentrated, insulating home values. Prices increased in Brisbane (+0.12%), Perth (+0.13%), and Darwin (+0.04%), while prices in Canberra were unchanged.
While interest rates have been a primary driver of home price falls to date, other factors are also at play, including the availability of properties for sale.
“Sellers in market now are benefiting from low competition with other vendors, as buyers vie for available stock,” Creagh said. “The constrained level of properties available for sale is ‘putting a floor’ under home prices and has concentrated buyer demand. The longevity and depth of the current downturn will be influenced by the level of supply, as well as the trajectory of interest rates, in the months ahead.”
This was the case for all capital cities except Hobart, where total listings increased more than 30% compared to the previous five-year average. That increase in choice has eased competition and demand per listing has almost halved in Hobart in the past year.
While most markets saw home prices fall from their peak, prices nationally remained 29.4% above their pre-pandemic levels.
Creagh said that if the cash rate lifted another 25bp in March to 3.6% as expected, it will further reduce borrowing capacities.
“However, if supply remains limited, this will help counter the downward pressure on home prices,” she said. “Positive demand drivers stemming from the shortages in rental supply and rebound in international migration also remain.”
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