As the era of strong price growth is over for Australia as a whole, Brisbane and Adelaide have become the last strongholds amid the market downturn that has swept the country.
Frank Knight Global House Price Index – which tracks average house prices in 56 countries around the world – showed that the Australian property market saw house prices fall by 0.8%.
The figures represent the third biggest fall in prices in the country on a three-month basis and puts the Land Down Under behind its peers as one of seven countries to record a fall in property values during the period.
The report notes that while prices in the Asia-Pacific region are at the forefront of the expected slowdown in global real estate markets, global markets are generally showing signs of resilience.
Overall, the global index rose 10% year-on-year, with 51 of the 56 countries tracked continuing to see rising house prices. Knight Frank noted that the strong annual performance was achieved despite expectations of a noticeable slowdown in the second quarter due to recession fears, energy prices, rate hikes and geopolitical concerns.
However, taking into account soaring inflation, global house prices in real terms are only showing an average growth of 1.6% in the year to the second quarter, against 6.2% a year earlier.
According to Knight Frank residential sector manager Erin van Tuil, the Australian property market has slowed significantly due to weakening buyer sentiment, with consumers shifting from fear of running out to fear of overpaying due to new responsible lending laws and recent rate hikes.
The expert predicts that sentiment will continue to be gloomy as the Reserve Bank of Australia continues to raise the country’s official exchange rate, which currently stands at 2.35% after a rapid rate hike cycle that has started in May.
“With further upward adjustments to the official exchange rate and rising cost of living in the coming months, we can expect sentiment to subside in the Australian housing market with moderate pressure or the expected decline in house prices over the next 18 months,” Ms. van Tuil said.
Although Knight Frank expects the value of residential housing in Australia to fall by 3% by the end of 2023, Ms Van Tuil said the price movement would only be a return to normal rather than a further decline in the market.
“Given the significant growth we have seen over the past two years, these cuts are starting from a very high base and we are now likely seeing a normalization in house price growth,” she explained. .
It also indicated when a rebound will occur for the country’s residential market. “We expect trends to return to positive territory in 2024 given the lack of new properties being built across the country,” she said.
Although the outlook for national housing values looks bleak, Knight Frank Global Residential Cities Index for Q2 2022 showed that two Australian cities have become stars.
The report – which monitors average house prices across 150 cities in 56 countries and territories – showed that Brisbane and Adelaide were the only Australian cities to secure a place in the list of the top 20 global cities that recorded the strongest property price growth in residential prices over a 12-month period.
Adelaide snagged 10th place as South Australia’s capital saw a 25.6% annual gain in house prices.
Meanwhile, Brisbane clinched 20th place, with the Queensland capital seeing a 20.4% growth in house prices over the same period.
Ms van Tuil attributed Brisbane and Adelaide outperforming their capital counterparts to demographic trends.
“Australia’s best performing cities for annual price growth, Brisbane and Adelaide, also experienced high population growth in 2021 compared to the Australian average. This had the most impact on rental space, given that many people moving to a new area tend to rent before making a purchase,” she said.
Hobart was not far behind the capital of the Sunshine State, with the Tasmanian capital securing 21st place with 20.2% annual earnings.
Canberra climbed to 67th place as median house prices in the ACT capital rose 9.9% over the period. Darwin followed in 87th place with a 6.6% gain, while Perth sat in 89th place with a 6.6% year-on-year increase.
Especially small towns stole a march on their capital peers, with Sydney and Melbourne rank 104th and 109th respectively. The two largest capitals were significantly outperformed, posting only 5.1% and 4.3%, respectively.
Ms. Van Tuil attributed the stable performance of small towns and regional areas to several factors.
“Key factors that continue to drive small town and regional residential markets include the relocation of digital nomads to more affordable locations as investors return to the market in search of a higher rental yield than they could get. in major capitals and vacation homes purchased to integrate retirement. plans in the years to come,” she said.