Chapter 1: What recent trends are impacting the Sydney and Melbourne property markets?
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Well, it's another weekend and maybe a busy day for you in the housing hunt or attending an auction somewhere across Australia on this Saturday, the last day of the month. Yes, the 30th of April for 2022 today. Tomorrow is the start of May. The year is steaming ahead. Coming up, we've got a property report that has been released by Domain and we'll be talking to the author of that report.
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Chapter 2: How has the pandemic influenced housing demand in Australia?
including luxury weekends away, all you need to do is email us to this email address, myrealestatepodcast at gmail.com. Again, myrealestatepodcast at gmail.com and put in the header, The Real Estate Breakfast Club. It's the main centre forecast with propertybuyer.com.au. All right, let's have a look at weather across Australia. And in Sydney today, expecting some rain and a high of 24 degrees.
Melbourne, it's going to be cool with just 18 degrees and partly cloudy. Brisbane, expecting a shower or two with 27 degrees. And in Perth today, expecting a sunny day, a sunny Saturday and a high of 24 degrees. It's your weekend real estate podcast. Well, Domain have released a report with the title, Price Growth Slows in Sydney, Melbourne and Canberra as Australia Adjusts to a New Normal.
Chapter 3: What factors have contributed to the slowdown in property price growth?
Joining me this morning is Domain's Head of Research and Economics, Nicola Powell, to discuss this further. Nicola, welcome to the Real Estate Podcast.
Hello, Craig. Thanks so much for having me here. It's great to be on.
Well, it's great to have you on. And if we need more proof that Australia is adjusting in the property market to a new normal, all you have to do is read the first line in your report, which says, and I quote, is 10 times slower this quarter compared to last, suggesting the property boom is on the cool down.
So if we look at the turn in the market, what for you have been some of the standout factors that have surprised you the most?
I think I've learned one thing when analysing property since the pandemic began is to not be surprised by any trend because, you know, what we've seen in our housing market since the pandemic began, you know, has been, I think, a surprise for all.
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Chapter 4: Why are houses outperforming units in Sydney's real estate market?
You know, we have seen extreme rates of property price growth. We saw the ability for people or knowledge-based workers to work from home and that really changed demand in our housing market and opened up locations where people could purchase. And, you know, we saw that play out in extreme rates of property price growth in, you know, many areas across Australia.
And I think the biggest thing that surprised me is, you know, we have seen our capital city markets or Australia, our major capital city markets have been synchronised. So that means they were all growing. That's the first time we've seen that since post-GFC. And I suppose 2022, the biggest surprise has been we're now back to our capital city markets operating on multiple speeds.
So we're seeing different rates of price growth and even different directions of price growth come out across our big cities. So Brisbane and Adelaide are recording the strongest rates of house price growth, while we've got weaker conditions coming out of Sydney, Melbourne and Canberra.
Chapter 5: What are the current conditions in the Melbourne housing market?
Yeah, that's quite interesting, the way that the speeds are different. And let's just have a look at Sydney from your report, which said that despite losing greater momentum, Sydney house prices continue to outperform units in the last quarter and have grown over four times faster annually, a disparity that retains a record price gap between the property types.
What do you think is happening there for that to be happening?
Yeah, I mean, we have seen one of the themes from this upswing has been houses have greatly outperformed units. And that's something that's not just isolated to Sydney. It's happening in most of our capital cities and we've got many of them with a record price gap between houses and units. You know, I think we certainly have seen a preference for homeowners for space.
I think, you know, what we've seen from the pandemic is, you know, some of us are able to work remotely and work from home. It's changed how we've used our homes. And we have to remember that this upswing was driven by owner occupiers.
Chapter 6: How are buyer behaviors changing in response to market conditions?
It was driven by upgraders. And I think that's what's playing out here in the performance difference between houses and units. And investors were really, they shied away from the market during this upswing. They've started to come back over the last six months or so. When you have a look at the value of home loans to investors, it has hit a high.
in 2022, while we've got a decline in the value of home loans being financed to owner-occupiers and first-home buyers. And, you know, these are, you know, particularly first-home buyers much more sensitive to changes in affordability. But I think, you know, it has been an interesting one to watch because particularly in Sydney,
you tend to find price cycles for houses and units do follow one another quite closely. And this was really unusual in this upswing to see this great disparity between price performance of these two property types.
Chapter 7: What predictions can be made for the future of the property market?
It's going to be an interesting one to watch. We have seen houses lose greater momentum, but tech Technically, units fell over the quarter. They were down by 1.2% in Sydney, while house prices in Sydney were still up. I mean, they were sideways, really. They were up by only 0.2% over the quarter. It's going to be an interesting one to watch because we've got investors coming back into the market.
We've got very tight rental markets and a landlord's market in Sydney. And units are a preferred property type. So, it's going to be interesting to see how This next stage of the property cycle unravels and, you know, whether or not we actually see house prices record a greater decline in price relative to what we see eventuate in the unit market.
Yeah, it's going to be interesting that next quarter for sure. Now, let's have a look at Melbourne. Melbourne house prices rose. recorded the first decline since the June quarter of 2020. You observed that there are more homes being listed for sale than being purchased. Tell us a little bit more about the Melbourne discoveries, I guess, in the report.
Yeah, so in Melbourne, the slowdown in the housing market overall became much more apparent over the first quarter of 2022. We've got house and unit prices falling over the first quarter this year, and they've fallen from those previous record highs. And it's the first time we've seen both house and unit prices fall over a quarter since the June quarter of 2020.
What we're seeing in Melbourne is the premium end, the higher end of the market is leading the downturn and that does tend to historically be the case. We've got Melbourne's inner and inner south recording some of the more significant declines in house prices over the quarter. You know, what we have seen is greater purchasing power for buyers.
What we're overall seeing is the availability, the choice on the market is building. When you have a look at total supply on the market in Melbourne, it's sitting about 8% above the five-year March average. And so that's continuing to improve buyer choice. And I think buyers are knowing this. They're using this to their advantage. They're taking their time with their purchases.
They're using that to negotiate. And even when you have a look at the number of new listings coming onto the market, over the first three months of this year, Melbourne saw the highest number of newly advertised homes for sale over a March quarter since 2014. And it's soaring 19% above the five-year average. That really says to me that we've got sellers out there reacting to
The fact that prices are still close to a price peak, but I think they're being very strategic in their market timing and they're listing their homes for sale, you know, before prices come off even further and perhaps even timing it before we see interest rates rise.
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