Sydney continues to lead the nation’s housing rebound, with values rising another 0.23% in the week ended 6 April.
Values rose by smaller amounts across Melbourne (+0.13%), Adelaide (+0.04%) and Perth (+0.02%), and were flat in Brisbane over the week:
At the 5-city aggregate level, home values rose by 0.12% over the week, which was the fifth consecutive weekly rise:
Quarterly price growth is now flat (0%) at the 5-city aggregate level, with rises in Sydney (+0.9%) and Perth (+0.1%) offsetting falls across Melbourne (-0.6%), Brisbane (-1.3%) and Adelaide (-1.0%):
Home values are now tracking 9.0% below last year’s peak at the 5-city aggregate level, with the three largest capital city markets driving the decline:
The next chart plots price growth across those same three major markets and shows clearly how Sydney is driving the nation’s housing rebound:
Since bottoming on 7 February, Sydney’s daily dwelling values index has risen 2.1%, driving a 1.1% rise at the 5-city aggregate level.
The outlook for home values has brightened given the Reserve Bank of Australia (RBA) held rates steady on Tuesday and signalled that we are at or close to the interest rate peak.
Low advertised supply, the tightest rental conditions on record and surging overseas migration are providing positive momentum to housing markets. Now the RBA’s rate hikes should add to that momentum.
On the other hand, the fixed rate mortgage reset will peak this quarter and next, which could cause an increase in distressed sales and pull down price growth.
My view is that house price growth will accelerate into next year for the following reasons:
- The RBA will likely cut rates later in the year, which will increase borrowing capacity.
- APRA will likely follow suit by cutting the 3% mortgage buffer, increasing borrowing capacity further.
- The fixed rate mortgage reset will have largely run its course.
- Extreme immigration and rental tightness will lift buyer demand.
- Housing supply will remain constrained due to soaring construction costs and builder collapses.
In short, the stars are aligning for a strong lift in housing prices in 2023.
