Property prices bounced back in February, however, there could be more downside ahead according to experts.
The latest data from CoreLogic showed property prices experienced the smallest monthly fall since May 2022, with national property prices down only 0.14% in February.
Sydney lead the rebound with a 0.3% increase in median price, however, all other capital cities recorded falling values, with Hobart suffering the most significant drop, tumbling 1.4%. Melbourne and Brisbane both declined 0.4%, Canberra was down 0.5%, Darwin 0.4%, Adelaide 0.2% and Perth 0.1%.
CoreLogic’s research director, Tim Lawless, said the stabilisation in housing values over the month was helped by consistently low advertised supply levels and a rise in auction clearance rates.
"The February housing market performance suggested some renewed strength in market conditions, while the flow of new listings has been at below-average levels since September last year, which has helped to support a reduction in the pace of value falls," Mr Lawless said.
"But, it’s probably too early to call a trough in the cycle considering there are several factors which could trigger a ‘re-acceleration’ of housing value declines over the course of the year."
Mr Lawless said the past four weeks saw the flow of new capital city listings track 17.0% lower than a year ago and 11.9% below the previous five-year average, which has been a trend that has been occurring since September last year.
Auction clearance rates also bounced back last month, reaching the high 60% range through the second half of the month, while Sydney clearance rates rose to above 70% for the first time since February 2022.
The upper end of the market in the capital cities drove this month’s stabilising trend, increasing by 0.1% in February. While still falling, declines across the lower end of the market also stabilised, down 0.1%.
Over the month, there was a seasonal rise in weekly listing volumes, with roughly 11,250 more new listings advertised compared to January, bringing the number of new listings to 38,118.
Despite the jump, this is still 12.6% below the previous five-year average for this time of year, and the total volume of listings counted nationally was approximately 143,500, which is 26.3% lower than the previous five-year average.
Against relatively low advertised stock levels, the estimated volume of sales recorded a strong seasonal bounce back in February.
Mr Lawless said while the monthly volume of sales is subject to revision, this lift in sales backs up the theory that purchasing demand may have been stronger than supply throughout the month.
Rents continue to rise
According to Mr Lawless the highest rental growth is now occurring in the unit sector across the three largest capitals, with Sydney unit rents jumping 16.7% over the past year.
According to Mr Lawless, rising immigration has been a major reason behind the rise in rents and plunging rental vacancy rates.
"Several factors may be contributing to the surge in unit rents, including rental affordability pressures, a transition of demand towards higher density rental options, and a strong rebound in foreign student and international migrant arrivals, particularly in inner city precincts and areas within close proximity to universities and transport hubs,” he said.
Risks still remain
Mr Lawless warned that despite the recent trend towards stabilisation, housing risks remain skewed to the downside.
He said that it is too early to call a trough in the cycle as several factors could trigger a ‘re-acceleration’ of housing value declines over the course of the year, including the expected rate hikes, a further decline in borrowing capacity, and challenges to serviceability due to an ongoing increase in interest rates, rising unemployment, and a higher cost of living.
"On the back of the latest increase in the cash rate, there are still more rate hikes expected over the course of the year, and a further decline in borrowing capacity is on the cards, which could reaccelerate housing market declines," he said.
"Low advertised stock levels are likely to persist as homeowners resist selling in a declining market.
“However, there may be a small portion of prospective vendors who become more motivated or are forced to sell amid growing challenges to serviceability."
Mr Lawless said longer term, the market is poised for recovery and despite the headwinds accumulating for the housing market in 2023, there is no denying the fundamental under-supply of housing stock.