The Australian housing market has been on a roller coaster ride in recent years, with prices soaring to record highs in 2020 and early 2021 before experiencing a significant downturn in early 2022. The market seems to be following a volatile trend well into 2023.
The housing crisis can be traced back to late 2018 when Australia experienced a prolonged drought that led to water shortages and devastating bushfires in the country. The fires resulted in widespread damage to homes, property, and wildlife and led to concerns about the long-term economic and environmental impacts.
In 2020, the COVID-19 pandemic hit Australia, leading to widespread shutdowns and economic disruptions. The government responded with a range of stimulus measures including wage subsidies, tax cuts, and business grants, to support the economy and prevent a recession. Later, in September 2020, the Reserve Bank of Australia (RBA) lowered the interest rates to a historic low of 0.1% in an effort to stimulate the economy and encourage borrowing and investment.
In 2021, the Australian government introduced a controversial media bargaining code, aimed at forcing tech giants like Google and Facebook to pay for new content. The move was widely criticized by the tech industry and led to threats of boycotts and legal challenges. In March 2021, the RBA announced that it would scale back its bond-buying program amid signs of economic recovery and rising inflation. This led to concerns about the impact on the housing market and consumer confidence.
Australia’s economy has experienced a significant rebound in 2021, with the GDP growing by 1.8% in the first quarter of the year, marking its third consecutive quarter of growth. The country was successful in containing the spread of COVID-19 which allowed for a faster reopening of businesses and a return to more normal economic activity. However, the Australian housing market has been a source of concern for some analysts, with property prices rising sharply in recent months. Low-interest rates, government incentives for first-time home buyers, and increased demand for larger homes have contributed to the surge. Some experts warn of a potential housing bubble and the risk of a sharp correction in prices.
Despite the recent dip in prices, there are still concerns that the market may be overheated and that a correction is overdue. This is partly due to the low-interest rates, which have encouraged buyers to take on larger mortgages and bid up prices. With the RBA expected to raise interest rates soon, many analysts are predicting that the housing market may soften further.
According to property data company CoreLogic, home prices across Australia’s five major cities fell by 0.1% in the week of February, following a rise of the same percentage in the previous week. While this may indicate a market in which sellers are willing to compromise to secure a sale, it is too early to tell whether this will be a long-term trend.
Australia has a long-standing issue with housing affordability, with many cities experiencing a shortage of affordable homes for both buyers and renters. One factor that could mitigate the impact of higher interest rates is the continued tight supply of housing in many cities. The Australian housing market is also being driven by changing consumer preferences, and the tight supply situation is also reflected in the lack of listings available for serious property buyers, with A-grade properties selling quickly and with minimal discounting. Houses are selling faster than apartments and vendor discounting are still at low levels.
Another trend that is likely to shape the housing market in the coming years is the rise of sustainable and energy-efficient homes. Australia is one of the world’s leading countries when it comes to renewable energy, and there is growing interest in homes that are designed to reduce energy consumption and greenhouse gas emissions. This could create new opportunities for builders and developers who are able to offer these kinds of homes to buyers.
While the Australian housing market is facing all these challenges, it has a strong and diversified economy, a skilled workforce, and a stable political system that supports long-term growth. Efforts to address issues such as housing affordability and geopolitical risks will be crucial to ensure a sustainable future.
The Australian housing market still has long-term prospects due to a growing population and strong economy, with demand for new housing in many areas. The response of the property market to the expected cash rate hike by the Reserve Bank of Australia remains uncertain, despite high auction clearance rates indicating strong demand. However, there are signs of recovery and resilience, and many experts remain cautiously optimistic about the country’s long-term prospects.