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Australia’s house prices have declined over 2022 – That is what news headlines are telling everyone.
That is the truth, but only part of it.
Headlines give you the impression that every region and every suburb is following Sydney and seeing a price downfall, but is that the case?
In the past week, InvestorKit team went through the median sales price, sales volume, sale days on market (DOM) and Inventory trends of thousands of suburbs across the country (house market only) over the past half a year. This blog presents some of our findings, something different from the headlines.
Sales Volume Decline NOT Deepening Everywhere
The country’s total sales volume has declined since Feb (below chart). Eight months into the decline, we now see various trends in different regions.
The below chart shows the monthly sales volume change in % of all GCCSA (Greater Capital City Statistical Area) regions over the past half a year, sampling every two months.
While most regions’ sales volume declines are still deepening, some stand out with a slowdown or even recovery. Greater Melbourne and Greater Adelaide’s sales volume declines have been slowing since mid-year, and ACT’s sales volume seems to be slightly increasing (+0.72%) in the past month. It’s worth noticing that ACT’s dramatic swing in the chart could be because of its small number of sales.
Sale Days on Market (DOM) Still Dropping in Many Submarkets
Unlike sales volume that has been decreasing (a sign of market pressure relief) since Feb as the pandemic property boom ended, the average time it takes to sell a house in Australia is still declining, indicating healthy market pressure persisting in many submarkets.
Breaking the national trend down to a GCCSA level, we start to see various patterns. Whilst most regions’ house DOM have begun rising at some point in the past 6 months, some regions are still enjoying dropping DOMs, such as Greater Adelaide and Regional South Australia.
More than Half of Australian SA3s Still Enjoying Low Inventory
Inventory is the ratio of for-sale stock on market and monthly sales volume, indicating a region’s supply level relative to demand. If a market’s inventory is lower than 3 (meaning the current stock will be sold out within 3 months if nothing new comes in), the market is deemed low in supply. Our October inventory review on SA3 (Statistical Area Level 3) level shows that 59% of all SA3s have an inventory lower than 3 (below chart). The low supply level could be protecting many markets from dramatic market pressure drop as demand (sales volume) trends down.
Currently among all the GCCSA regions, ACT and Greater Adelaide has the lowest inventory level, followed by Regional SA and Greater Perth.
5 Regions where Market Pressure Remains High
We see many SA3s enjoying dropping SOM, and quite a few of them have sales volumes still rising or very much lifted relative to the supply level, among which are the five regions below.
Tea Tree Gully
Greater Adelaide is undoubtedly the best performer among all capital cities over the past half a year, with both sale DOM and sales volume showing remarkable resilience. Tea Tree Gully and Marion are two of its best-performing submarkets.
Tea Tree Gully’s house sale DOM has been declining until the end of Aug (above chart), and our Oct review shows that the region’s average sale DOM dropped by another day from early Sep to mid Oct.
In terms of sales volume, though it dropped slightly from the May peak, it’s still at a heightened level relative to the available stock for sale, leading to one of the countries lowest inventory levels – 1.35 months of stock.
Tea Tree Gully’s median house price sat at $586k at the end of Aug. We won’t be surprised if it keeps growing with the current high market pressure.
Marion
Marion’s house sale DOM has been declining at a stable pace up to the end of Aug (below chart), and our Oct review shows that the region’s average sale DOM dropped further by 3 days from early Sep to mid Oct.
Like Tea Tree Gully, Marion’s monthly sales volume started declining mildly a few months ago. However, it’s still at a heightened level relative to the available stock for sale, leading to a fairly low inventory level of 1.49 months of stock.
Marion’s median house price was $682k at the end of Aug. The high market pressure would make it easy for prices to keep growing.
Barossa
Regional SA is another out performing GCCSA region, and Barossa is one of the best performers in this region.
Barossa’s house sale DOM has been declining through to the end of Aug (above chart), and our Oct review shows that the region’s average sale DOM dropped by another 1 day from early Sep to mid Oct.
The number of sales in Barossa has been stable over the past year, whilst the for-sale stock is slightly shrinking, leading to constantly rising market pressure and a current low inventory of 1.88.
Barossa’s median house price was $441.3k at the end of Aug.The high market pressure is expected to push it further up.
Rockhampton
North and Central Queensland markets have shown strong resilience over the past half a year. Rockhampton is representative of the two regions.
Rockhampton’s house sale DOM has been declining up to the end of Aug (above chart), and our Oct review shows that the region’s average sale DOM dropped by another day from early Sep to mid Oct.
In terms of monthly number of sales, although it has dropped slightly from the June peak, it’s still at a lifted level relative to the available stock for sale, leading to a low inventory level of 2.56.
Rockhampton’s median house price sits at $376k.The high market pressure makes it easy for the price to keep growing.
Armidale
Many regional NSW cities’ market pressure is gradually relieving; Armidale is one of the inland cities against this trend.
Armidale’s house sale DOM has been dropping dramatically to the end of Aug (above chart), and our Oct review shows that the region’s average sale DOM dropped by another 3 days from early Sep to mid Oct.
While the number of sales in Armidale has been trending down from its Apr peak, the for-sale stock is also declining, leading to even higher market pressure in the region, and an inventory level of 2.40 months of stock.
Armidale’s median house price sits at $470k at the end ofAug. The high market pressure is expected to lift prices further.
Affordability, Low Supply & Early Stage in Growth Cycle Contribute to the Resilience
What’s in common about the above 5 regions?
They are all relatively affordable, low in supply and at a relatively early stage of their growth cycles. We believe these factors have contributed to their resilience against the widespread market pressure decline.
A. Affordability
– Greater Adelaide and South Australia are much more affordable than the other east coast states (NSW / VIC / QLD / TAS).
– North and Central QLD houses are much cheaper than those in Southeast QLD (Brisbane / Gold Coast / Sunshine Coast).
– In-land cities in NSW are way more affordable than the state’s coastal towns.
Common sense tells us that when borrowing becomes more expensive, buyers are first priced out from the more expensive markets, relieving market pressure; At the same time, affordable regions are less stressed.
And data proves that. The below chart shows the % of suburbs with rising sale DOM (a sign of the market cooling down) in different price groups over the last 6 months. The % in the most affordable suburb group is significantly lower than the more expensive ones.
B. Low in supply
– The two Greater Adelaide regions – Tea TreeGully and Marion – have inventories lower than 1.5, which are among the lowest supply levels across the country.
– Rockhampton and many other North and Central QLD markets once had high levels of supply especially at the end of the mining boom;However, as the excessive supply being absorbed, market pressure there has now started to accumulate.
– Tree-change has become trendy in recent years as more people are drawn by in-land towns’ lifestyle, affordability, and new job opportunities.This trend surged during the pandemic, but Armidale and many of its in-land fellow cities do not have enough house stock to meet the suddenly lifted demand, leading to supply crunch in these markets.
As mentioned above, low supply levels make sure that the market pressure in these regions stays at a relatively high level and/or relieves slowly when demand has gone down.
C. Being in an early stage in their growth cycle
– Having surged in the early 2000s, Greater Adelaide and regional SA’s house price growth has been suppressed over the past decade (below chart – left).
– North and Central Queensland’s house markets were hit by the end of the Mining Boom, and only started regaining growth momentum in recent years as their economies recovered (below chart – middle).
– NSW inland cities’ house price growth has lagged behind their seaside counterparts over the past decade and only started to catchup now with local economies boosted by heavy public & private investments (below chart – right).
Lower long-term growth paired with recent strong rising momentum indicates that these markets are at an early stage of a growth cycle, featuring lower prices, increasing or high demand& market pressure, which create a buffer against current headwinds. On the contrary, markets that represent low relative affordability and surging listing levels are seeing headwinds impacting them more due to a reduction in demand/sales volume.
Data Plays a Crucial Role
Headlines tend to describe Australia’s property market as a disaster, but don’t let them scare you. Data shows that while many submarkets are losing market pressure, there are regions displaying strong resilience against all the headwinds. Affordability, low supply level, and being in an early stage in the growth cycle have underpinned their resilience.
As much as we believe in Australia’s property market, it’s not anymore the time when you can achieve double-digit growth by buying almost anywhere. We are back in a market with diverse submarkets running in different cycles.
Data become more crucial in such a market, as they help you interpret trends/market cycles and identify the most suitable market for your needs, whether it’s growth, stability, diversity, etc.
InvestorKit is a buyers’ agency that always trusts in data. We have been using demographic, economic, and property market data to identify purchasing locations and examine market trends (for example, this blog) from day one. Data is our secret weapon in helping our clients achieve their investment goals faster. Interested in property investment but unsure where to buy in the current climate? Talk to us! Click here and request your 45-min FREE no-obligation consultation today!