House prices Australia: Mortgage cliff, stock levels will disrupt recent property rise


Since capital city housing prices peaked in May of last year, things have only got ever more challenging for the nation’s property market. In the past nine months, Australians have seen the largest and most rapid rise in mortgage servicing costs in the nation’s history.

Prior to the current rate rise cycle, the largest increase in mortgage interest repayments was 58 per cent, which occurred over a six-year period from 2002 to 2008.

According to figures from housing data provider CoreLogic, Aussie housing prices at a five capital city level are falling faster than those of the United States during the Global Financial Crisis recession.

But in recent weeks price falls have moderated significantly in the nation’s capital cities, with some even reporting a rise over the course of February. The big question is why is this occurring, even as interest rates continue to rise and inflation adjusted household incomes fall at the most rapid rate since comparable records began?

While its impossible to know for certain exactly what has underpinned this shift, we can explore some of the possibilities and the underlying data can tell us about conditions within various housing markets around the nation.

Listing volumes collapse

Historically there are seasonal factors that define activity and broader outcomes within the housing market. For example, there is almost always a surge in listings in Spring as the selling season kicks off the end of the markets winter hibernation and a ramp up in activity as the weather becomes more favourable.

In every year since at least 2010 new listing volumes in Spring are significantly stronger than those seen in Winter, even during the dark days of lockdowns in 2020 and 2021, the Spring selling season surge still took place.

That is until 2022.

Last year saw the spring selling season produce fewer new listings for capital city properties than winter, a surprisingly poor result.

Support for the market

Since then, listing volumes have fallen even further according to CoreLogic, with December recording the lowest level of new listings at a national and an aggregate capital city level since at least 2008. This has offered the property market a fair degree of support in recent months.

Various locales and regions have experienced this collapse in listing volumes differently. For example, in Hobart new listing volumes were less than half what they were back in the same month in 2010.

Meanwhile, in the ACT, new listing volumes for December were above almost every seasonal low in the past 15 years, with the only exception being December 2021, which was impacted by the pandemic.

While there are a multitude of factors that guide the trajectory of property prices, supply and demand plays a major role.

In the months that followed the RBA starting to raise interest rates, demand for property fell as the borrowing power of households swiftly evaporated. This was evident in housing turnover volumes which fell well below the five-year average from October last year.

The other side of the coin

As things stand today, three of the big four banks are predicting a further 0.75 per cent worth of rate rises, to take the cash rate to a peak of 4.1 per cent. Recent interest rate futures market pricing has seen a peak of 4.35 per cent pencilled in.

Amid the backdrop of the so called Fixed Mortgage Cliff which will see 800,000 borrowers have their cheap fixed rates expire and be forced on to higher cost loans, it’s clear that the existing rises in interest rates and those yet to be made are likely to weigh on the property markets fortunes.

To what degree this will be balanced out by property owners simply holding off on listing their homes for sale, remains to be seen.

The latest data

So far there is little sign of these postponed listings coming to market. According to the latest data new capital city listing volumes remain 11.9 per cent below the five-year average. Considering that this five-year period includes the period of weak new listings in 2018-2019 due to the impact of the Banking Royal Commission, as well multiple years impacted by the pandemic, it illustrates just how far new listing volumes have fallen below their norms.

With new listing volumes so low, the total number of properties on the market in the nation’s capital cities is 20.3 per cent below the five-year average. When compared with this time in 2019, there are around 30,000 fewer properties for sale at a capital city level.

Going forward

Throughout much of the pandemic the nation’s various different property markets moved in a level of unison not seen in decades. Now as rates rise and the economy slows, outcomes are becoming much more varied based on locale.

In some cities property prices are once again rising, albeit modestly, while in others they would give the trajectory of the American Global Financial Crisis housing crash a run for its money.

With rate rises widely tipped to be far from over and the latest GDP data showing a contracting consumer economy, its still very early days in the final chapter of the current property price cycle.

Ultimately, uncertainty reigns supreme. Uncertainty over just how far interest rates will have to go and uncertainty over how long Australians can hold off from normal property transactions in the hope of better days ahead.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator





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