Property market tipped to see ‘winter surge’
Decade low listing numbers coupled with rising demand will see the property market further strengthen in coming months, according to CoreLogic.
Improving property prices, shorter sale periods and higher auction clearance rates are signs the property market may gain further momentum in the months ahead, CoreLogic has said. Some of this has been driven by lower levels of listings.
Recent data from CoreLogic indicates that the total number of homes listed for sale nationally is tracking around 28 per cent below usual.
CoreLogic research director Tim Lawless said this has led to above average clearance rates, faster selling time and less negotiation.
Auction clearance rates have been holding at 70 per cent or higher in recent weeks and volumes are slowly on the rise at a time when they would traditionally start to drift lower.
“When listing volumes are very low, selling conditions strengthen, which means potential vendors thinking about selling may well be tempted to list now rather than waiting until the traditional spring period, when activity surges and there’s a spike in competition to sell,” said Mr Lawless.
The four largest capital cities have all recorded an increase in housing values from the lows recorded in February.
“A mid-month update based on CoreLogic Australia’s daily Home Value Index showed the upswing gathering momentum, especially in cities such as Brisbane where the index is up 1.0 per cent over the past four weeks. Sydney however is still leading the charge,” said Mr Lawless.
The upwards pressure on housing values along with other indicators suggest that the market is gaining momentum rather than slowing down, he said. “The stronger clearance rates along with other vendor metrics like faster selling times for private treaty sales and reduced discounting rates, indicate sellers are getting a little bit more leverage back,” he said.
While fear of missing out has not yet returned to the market, Mr Lawless said some buyer demographics are highly motivated to get into the market.
“If the trend for low advertised stock levels, rising clearance rates and higher values continues, it would not be surprising to see ‘fear of missing out’ becoming more pervasive,” he said.
“As demand picks up against strong overseas migration and extremely tight rental markets, there’s likely to be some renters who try to fast track their purchasing decisions as well. The pool of available properties they’re competing for is the smallest it’s been in more than 10 years. A sense of urgency will likely play a part in some decision making over winter.”
Potential challenges for the market
High interest rates, deteriorating housing affordability and economic uncertainty do present some risks for the market, said Mr Lawless.
The recent increases in housing prices has been surprising, he said, and given that housing affordability measures remain stretched, such a strong rate of growth is likely unsustainable in the longer term.
“Demonstrating an ability to service a loan is going to be one of the biggest hurdles that prospective buyers will face this year. Interest rates are high, but assessment levels are three percentage points higher again,” he said.
“However, qualifying for the loan is only one challenge. We can’t ignore low consumer sentiment levels, which will also be having some dampening effect on the market’s current exuberance and we shouldn’t expect to see a material lift in property activity until there’s an improvement in consumer confidence more broadly.”
Mr Lawless said while there will be a rise in motivated selling or increase in mortgage arrears in the short to medium-term, most banks were reporting 90-day arrears rates of only around 0.5 per cent to 0.6 per cent at the end of 2022.
“That benchmark is set to increase, however most homeowners or borrowers will do their best to pull back sharply on discretionary spending before missing mortgage repayments or selling their home,” he said.
About the author
