The Australian property market has turned “multi-speed”, with different markets growing at varying rates according to a new report.
The latest PRD Real Estate Australian Economic and Property Report 2022 shows markets across the country have seen a slower pace of median house price growth in the first half of 2022, after the Reserve Bank of Australia started to aggressively lift the official cash rate.
PRD Chief Economist, Dr Diaswati Mardiasmo said rising rates had put pressure on some housing markets more than others.
“This year brings new challenges to the property market, on top of issues faced in 2021,” Dr Mardiasmo said.
“The Reserve Bank of Australia has changed its policy stance, whilst the Federal Government has not.
“As a result, each property market is reacting differently to the current forces at hand.”
According to the report, Australia’s two largest cities have witnessed the sharpest slowdown in price growth.
The NSW metropolitan market recorded 2.7 per cent median house price growth in the 12 months to the first half of 2022, a stark contrast compared to the 32 per cent growth recorded in the 12 months to the end of June 2021.
The Victorian metropolitan market recorded 1.5 per cent median house price growth in the 12 months to the first half of 2022, compared to 18.9 per cent growth recorded in the same period last year.
The two strongest markets for growth have been Queensland and South Australia, which are the only two metro markets to maintain the same level of price growth compared to last year.
The Queensland metropolitan market recorded double-digit growth of 23.5 per cent in the 12 months to the first half of 2022, similar to the 24.6 per cent growth recorded last year.
Meanwhile, South Australia’s growth grew, with 24.5 per cent median house price growth compared to 20.9 per cent.
The Tasmanian metropolitan market recorded double-digit growth of 11.4 per cent in the 12 months to the first half of 2022, which was lower compared to 33 per cent last year.
Meanwhile, the ACT saw a sharp fall in growth to just 0.4 per cent, which was a significant decline from 31.1 per cent last year.
Western Australia recorded just 0.5 per cent growth in the past 12 months, down from 5.7 per cent the previous year.
Dr Mardiasmo said the largest divergence in growth came down to supply and demand factors in each individual market.
“Depending on demand and supply, the market can still be growing, holding steady or turning to a decline,” he said.
Overall sales volumes declined in the ACT, NSW and Tasmania, and increased in all other states.
Vacancy rates have continued to tighten across every state and territory in Australia.
Construction activity was also moving at different rates, with increases recorded in Queensland, South Australia, Tasmania, Victoria and Western Australia compared to the same time last year.
Rental yields are also moving at different speeds depending on the balance between property price and rental price growth, with investors making decisions on a case-by-case basis.
According to Dr Mardiasmo, the RBA is likely to aggressively increase the cash rate in the remainder of 2022 and in 2023, before levelling out in 2024 and 2025.
On top of rising interest rates, demographic changes will also continue to impact housing markets in different ways.
“International students and long-term overseas visitors are back in droves, translating to a higher level of demand for housing stock,” Dr Mardiasmo said.
“Many more events and disruptions will colour the rest of 2022 and early 2023, creating a seemingly never-ending seesaw of demand and supply balance in the Australian property market.
“Where to from here? The key is in localised, granular market analysis.”
