After near-record rises during the pandemic, home prices in most parts of the country began to fall halfway through last year.
Headlines warning of declines at the fastest rate in decades began to appear.
Those declines, coupled with talk of recession-like economic conditions and predictions of property values falling further on the back of rising interest rates, caused anxiety among would-be homebuyers and sellers.
But just nine months after markets began cooling, there are signs that conditions could be warming up once more.
Is the correction over? Has the housing market bottomed out?
“After nine months of price falls, national home prices have reversed their falling trend,” PropTrack senior economist Eleanor Creagh said.
“Price falls began to ease in the final months of last year are now moving higher.”
In fact, PropTrack data shows that in March national home prices increased for the third consecutive month.
“National home prices continued to stabilise in March and moved slightly higher by 0.13%, bringing the cumulative bounce to date to 0.49% for the quarter,” Ms Creagh said.
Factors driving market conditions
While interest rates have been the primary driver of price falls to date, the impact of these hikes is being counterbalanced by numerous factors.
“The commencement of the Reserve Bank’s aggressive approach to curbing inflation through rate hikes immediately impacted housing markets across Australia,” Real Estate Institute of Australia president Hayden Groves said.
“But we’re already seeing market declines stabilise as population growth and supply shortages shore-up demand.
Net immigration ran at about 320,000 last year, up from a mere 5940 in 2021 at the height of Covid.
The figure throughout 2023 is likely to remain strong.
“Prices bounced in every capital city, except Hobart, Darwin and Brisbane, with Sydney, Perth and Melbourne recording the largest jumps.”
This population growth through immigration has combined with limited stock to drive rising prices, Ms Creagh said.
“Although the significant reduction in mortgage affordability and borrowing capacities implies further price falls, the downward pressure on prices from the substantial tightening already pushed through is being countered by positive demand drivers stemming from the strong rebound in immigration, and very tight rental markets.
“Fewer properties are hitting the market compared to the same time last year, which is creating a more competitive buying environment and buoying home values as there remains sufficient buyer demand to help keep prices resilient.”
Source: Home prices have started rising again. Is it a ‘dead cat bounce’ or has the market bottomed out? Paul Ewart for Realestate.com.au