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Surging inflation, rising interest rates & seasonal slowdown are contributing to a slower market in Adelaide / Market in a Minute Ep.18

Short, sharp, stats & updates on what’s happening in Adelaide’s property market in September 2022

 

 

Market in a Minute / Episode 18


As we enter the Spring selling season, national dwelling values have risen 8%, down from a cyclical peak of 22.4% recorded in the last year during the pandemic growth phase. The recent surging inflation, rapidly rising interest rates, and seasonal slowdown (as winter settles in) are factors contributing to slower market activity across the Australian housing market.

Thus, total listings are gradually rising, but remain well below the average for this time of the year. Total stock levels remain 25% below the five-year average across Australia. Also, properties continue to take longer to sell with the median days on market increasing to 32 days, up from a recent low of just 20 days.

Looking at South Australia in particular, Adelaide remains one of the few capital cities where dwelling values continue to rise. Low stock levels, excellent buyer demand, and positive migration is the standout winner across the Australian real estate market.

Dwelling values have increased by almost 45% through the growth cycle to date, adding approximately 201k to the value of an Adelaide dwelling. Considering softening growth, the Adelaide housing market might face slower activity over the coming months. However, home sales are holding strong, though, with the number of properties sold over the past three months up 22% compared with last year.

The combined capital cities auction clearance rate continues to trend lower, averaging out at 54% in July. This is down from 75% in the equivalent period in 2021. Over the last 2 months, OC’s auction clearance rates is averaging a little above 70%.

On the rental market front, the trend in rising rents is evident across the estate markets. Rent values grew by 0.9% last month, marking the sixth consecutive month that growth in rent values has been higher than growth in home values. Australian rents are now 9.8% higher over the year to July, and Adelaide by more than 11%.

Such tight rental markets, improving rental yields and stronger buying conditions may help to keep a floor under-investment demand.

Turning to finance, RBA has announced a fifth consecutive rate hike following its 6th September board meeting. Implementing a 50-basis point increase from the current rate of 1.85 per cent to 2.35 per cent, the highest level in seven years.

Reflecting on the hike, RBA governor Philip Lowe said, “the further increase in interest rates today will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy.” Mr Lowe added that “the board expects to increase interest rates further over the months ahead, but it is not on a pre-set path”.

According to economists, the US Federal Reserve’s actions are expected to influence the RBA, predicting early signs of relief in supply and demand pressures in the economy. In the US, a build-up in inventory is seeing retailers mark down the cost of some goods, while global input and commodity prices have also started to ease.

Money markets are indicating a lower peak in the cash rate than originally anticipated a few months ago, and CBA has suggested RBA cash rate cuts could be in store as early as next year. If these trends in easing inflation begin to manifest more widely, it could signal a floor for the Australian housing market to decline as early as 2023.

 

If you are looking to buy, sell, lease or have your property managed, reach out to one of our specialist property consultants here within the OC team.

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