Short, sharp, stats & updates on what’s happening in Adelaide’s property market in October 2022
Market in a Minute / Episode 19
In the first month of spring, Australian housing values rose 1.7%, down significantly from the cyclical peak of 22.4% achieved during the COVID growth phase in the previous year. Combined regional dwelling values (10.1%) continued to outshine those of capital cities (-0.7%). Most capital cities and state regions experienced a loss of momentum in the pace of value declines, except for Adelaide and Perth.
As a result of the recent surge in inflation, rapidly rising interest rates, and seasonal slowdown, the Australian housing market is experiencing slower activity. Thus, properties continue to take longer to sell with the median days on the market increased to 35 days, up from the 33 days recorded the previous month.
Through this quarter, capital city sales activity was estimated to be -12.2% lower than a year ago, but still about 6.5% higher than the previous five-year average. The flow of newly advertised housing stock has slowed, as has the buying activity. Fewer buyers can be attributed to several factors, including a reduction in borrowing capacity due to higher interest rates, low consumer sentiment, and a fear of paying too much for a property.
In South Australia, due to low stock levels, affordable housing values, solid buyer demand, and positive migration, Adelaide’s housing market has proven more resilient to falling prices than most capital cities. However, values are now succumbing to the downward pressure of higher interest rates, slipping -0.2% lower in September.
The slight decline is primarily due to the decline in house values, which have fallen by half a per cent since peaking, while unit values remain at record levels. Additionally, home sales are performing better than most cities, with this quarter’s sales estimated to be 18.5% higher than a year ago and almost 40% above the five-year average.
This month, the combined auction clearance rate for capital cities tended to be higher, averaging 59.8%, compared to 56.8% last month. This is down from 74.3% in the equivalent period in 2021. Over the last 2 months, OC’s auction clearance rate has averaged a little above 78%.
On the rental market front, the trend of moderate growth is evident across the estate markets. Last month, rent values increased by 0.6%, the lowest monthly increase since December 2021. National rents are now 10% higher over the year to Sept, and Adelaide by more than 12.8%. This gradual slowdown in rental growth in the face of such low vacancy rates could be an early indication that renters are reaching a tipping point in terms of affordability.
Turning to finance, RBA has announced a seventh consecutive rate hike following its 1st November board meeting. Implementing a 25-basis point increase to a nine-year high of 2.85 per cent.
Reflecting on the hike, RBA governor Philip Lowe said, “this has been necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to target.” Mr Lowe added that “the board expects to increase interest rates further over the months ahead”.
The trajectory of interest rates will continue to influence housing markets. Although interest rates haven’t risen at this faster pace since 1994, the RBA board’s decision this month to lift rates by only 25 basis points had something of a “soothing impact” on buyer confidence.
Despite housing values being in an adjustment phase, we at Ouwens Casserly believe that the long-term trend remains positive as all our markets experience strong buyer demand.
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.
