The housing market in Australia, particularly in Sydney, has seen a notable recovery in May. The latest data from CoreLogic reveals a 1.2% increase in the national Home Value Index, marking the third consecutive monthly rise. Sydney experienced the largest gain, with prices rising by 1.8% in the month, the highest since September 2021 and equivalent to a nearly $50,000 increase in median dwelling value since January. Brisbane and Perth also saw significant gains, rising by 1.4% and 1.3%, respectively. Other capital cities also witnessed accelerated growth during this period.
Experts attribute this housing market surge to factors such as returning overseas migration, limited supply, and a tight rental market. The demand for housing is prompting some renters to consider purchasing homes, while investors are also returning to the market as rental income and yields rise. However, the supply of homes for sale remains tight, with a 13.1% decrease in new listings compared to the five-year average.
Reserve Bank governor Philip Lowe emphasized the housing supply challenge during his appearance before Senate Estimates. The strong population growth and prevalent housing stress require attention and resolution.
While regional areas experienced an increase in home values by 0.5% in May, the pace of growth did not match that of the capital cities. The rebound in regional prices remains slower, with the quarterly price growth in the capital cities outpacing the regional markets.
Despite the recent increase in interest rates and expectations of a slowdown in the economy, experts believe that the tight labour market, strong housing demand, and limited supply will continue to support the ongoing recovery in the housing market.
The recovery in Sydney’s housing market is primarily led by premium housing. The upper quartile of the market has seen a 5.6% increase in values in the past three months, surpassing the 2.6% growth in more affordable segments. However, despite this rebound, prices in Sydney’s upper quartile are still nearly 12% below their peak in January 2022.
In other parts of Australia, the property market is also heating up. In Sydney’s inner-eastern suburbs, a two-bedroom home was sold for almost $2.5 million, leaving the owner amazed since she had purchased it for $35,600 in 1978. The market’s strength is due to low supply, with properties in desirable areas selling quickly. Adelaide is also experiencing high demand, particularly from overseas buyers, leading to emotional situations for local buyers who are outbid. The limited housing supply in Adelaide is expected to be further strained by an influx of 75,000 people in the next two years.
Overall, the Australian housing market is experiencing a recovery driven by various factors, including returning migration, limited supply, and increased rental income. While challenges such as housing supply persist, the market is expected to continue its upward trajectory, albeit potentially influenced by future interest rate changes and economic conditions.