2022 has been a year of remarkable resilience in the property market, a new report suggests.
CoreLogic’s annual ‘Best of the Best’ report, which sums up the property market’s performance and provides an outlook for the year ahead, shows a diversity in conditions in 2022 across geographies, value segments and property types.
When summing up the year that was, CoreLogic Head of Research Eliza Owen highlighted two distinct characteristics of capital growth trends in 2022, with the first being that not all markets were uniformly impacted by headwinds.
“More expensive markets tended to see sharper declines, while the more affordable segment of the market where buyers typically do not have to extend themselves as much to buy into, saw greater resilience to increases in interest rates,” she said.
“The second trend is that the pace of decline has been slowing on a broad basis since September.”
CoreLogic Economist Kaytlin Ezzy added that a prominent theme was the Australian property market’s seismic shift in conditions over the space of 12 months.
“Last year’s Best of the Best celebrated some of the strongest annual sales turnover and value growth on record”, Ezzy said.
“This year’s report examines some of the most resilient markets as we move through one of Australia’s fastest interest rate tightening cycles in history.”
Over the year to November, national housing values fell 3.2%, driven by an annual decline in capital city dwelling values of 5.2%, while regional dwelling values rose by 3.3% over the same period.
Ezzy noted that across the capital cities, it was suburbs in Sydney’s City and Inner South, Northern beaches and Eastern suburbs regions that dominated 2022’s list for the largest declines.
“Houses in Narrabeen, Surry Hills, and Redfern recorded the most significant falls in value over the year, down more than 25%, while unit values in Centennial Park and Mona Vale fell by 23.1% and 20.8% respectively”, she said.
“At the other end of the scale, Adelaide suburbs dominated the list for strongest annual appreciation in value across both property types, with house values across Davoren Park rising by 34.7%, and unit values in Seacliff Park 41.4% above the levels recorded this time last year.”
According to Ezzy, Adelaide’s resilience has been a consistent feature of the housing market in 2022.
“While down 0.9% from the July peak, dwelling values across the city are still 13.4% above the level recorded this time last year”, she said, adding that Adelaide’s relative affordability and persistently-low advertised stock levels have helped insulate it from the worst impacts of rising interest rates.
So, what does the future look like?
The report suggests that one of the distinctive features of capital growth in 2022 was a slowdown in the pace of decline toward the end of the year. National value falls eased to 1.0% in November, following the steeper fall of 1.6% in August.
Owen said that although declines have been slowing, suggesting we may have moved past the peak home value declines, further rate rises are anticipated in the early months of 2023, which could cause the rate of decline to pick up once more.
“As we move into 2023, there continues to be a mix of headwinds and tailwinds for housing market performance”, she noted.
“With expectations that the bulk of the rate tightening cycle occurred in 2022, housing value declines could find a floor in the new year”, she said, adding that that floor could be affected by mortgage serviceability risks, particularly for those rolling out of record-low fixed mortgage rates through the second half of year.
“But unemployment levels remain at historic lows, which plays a role in serviceability, helping to keep a lid on mortgage arrears.
“On top of that”, Owen concluded, “strong rental markets and improving affordability from the point of falling values, may entice investors and first home buyers into the market, underpinning a recovery in buyer activity in the second half of 2023, when the cash rate stabilises.”
