Home price rebound is delicate, experts warn

Housing market recovery could be vulnerable to increased supply, rising unemployment

Home price rebound is delicate, experts warn

Industry experts have cautioned that while home prices in Australia have rebounded this year, the rate of increase is slowing down as more properties enter the market. They believe that the housing market's recovery could be fragile and vulnerable to factors such as increased supply and rising unemployment.

Eliza Owen (pictured above left), head of residential research for Australia at CoreLogic, said during a Sydney conference that the Australian market had shown resilience, but price growth had decelerated in recent months after reaching its peak earlier this year, The Australian reported. Owen also noted that sales volumes had plateaued, returning to long-term averages of around 480,000 dwelling transactions annually, following the surge in activity during the COVID-19 boom when sales volumes reached approximately 620,000 in 2021 due to plummeting interest rates.

Owen expressed concerns about the limited participation in the housing market, attributing it to credit-constrained buyers, according to The Australian. She mentioned that while values were still rising, there was a threshold on market participation.

“I think there is a tentative upswing that is very vulnerable to increases in unemployment due to increased supply through the spring selling season,” she said.

However, Owen remained optimistic about the market's prospects in the longer term, particularly once interest rates start trending lower.

Andrew Whitson, chief executive communities at Stockland, acknowledged the strong support from population growth and supply shortages. However, he also highlighted the challenges posed by the lack of affordability. Whitson said that the number of first-time homebuyers was at historic lows, and overall volumes were down, The Australian reported. He believed that the market would regain its equilibrium once interest rates stabilised and wage growth became more prominent. He predicted an increase in volumes starting in the financial year 2024, with a recovery gaining momentum by 2025.

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Owen noted that new listings had surged during winter, particularly in Sydney and Melbourne, and sales volumes had been sufficient to absorb the influx. However, total stock levels are now rising in those cities, which is starting to temper price growth, according to The Australian. Owen said that historically, listing activity was driven by price growth.

“So if the cycle falls back into negative territory and vendors are empowered to do so, they might not sell their property,” she said.

David Bailey (pictured above centre), chief executive of the Australian Finance Group, downplayed concerns about a potential mortgage cliff, stating that the impact would mainly affect those who had never had a mortgage before and would need to adjust their lifestyles, The Australian reported. He said that Australians generally prioritise mortgage payments, unless faced with significant life events, and that the post-COVID wage growth has also been beneficial.

“We’re not seeing stress,” he said.

Cameron Kusher (pictured above right), executive manager of economic research at REA, reflected on the predictions of significant price declines this year, which have not materialised. He pointed out that prices rose 4.3% in the first nine months of the year, accompanied by an increase in sales and strong demand for housing, despite the 400 basis points of interest rate increases.

“While I am not overly bullish on prices, I am cautious about forecasting falling prices when stock is low, little new housing is being built, borrowing costs are high and strong migration is leading to significant demand for housing,” Kusher said.

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