SOMP housing update
The Reserve Bank of Australia noted in its Statement of Monetary Policy (SOMP) that housing prices are down by around -5 per cent from their highs, dropping between April and October.
The RBA noted that nevertheless prices remain around +20 per cent higher than at the onset of the pandemic.
The price declines have been driven by the most expensive segments of the market, particularly in Sydney.
CoreLogic's indices have prices down by -6.9 per cent at the 5-capital city level since peaking six months earlier, with the declines also driven by the top end of the market.
This broadly accords with what we've been seeing in the market, although from what I've seen there's been plenty of evidence of bigger price falls than this, at least in Sydney and Brisbane.
Market segments
While the headline numbers don't look too alarming, there have been some brutal price declines in some segments of the market, including for some coastal boltholes where prices had all but doubled from 2019 prices.
Now those gains are being unwound at a rapid pace in some markets.
In Sydney the lower end of the market has generally held up better, including notably unit prices, which have perhaps been underpinned by ballooning construction costs.
Louis Christopher of SQM Research noted the recent strength in Sydney's eastern suburbs, for example, perhaps reflecting the affluence of the locals.
Premier Perrotet is pushing ahead with stamp duty reforms in New South Wales for early 2023, which would lead to a burst of activity in the sub $1.5 million price bracket as stamp duty is scrapped for first homebuyers opting for the alternative land tax option.
There are also dropping vacancy rates in Sydney and Melbourne's inner- and middle-suburbs to take into account.
SQM Research now has combined asking rents in Sydney up by more than 28 per cent over the past year.
SQM Research now has combined asking rents in Sydney up by more than 28 per cent over the past year.
This may not have been reflected across all properties, but if sustained will impact the buy versus rent decision.
Falling household sizes
The RBA noted that Australia's average household size fell to a new low through the pandemic, resurrecting a trend towards lower household sizes which has been underway for decades now.
This has added the requirement for an additional 400,000 dwellings since 2016, according to Brendan Coates of Grattan, with the average household size dropping from 2.57 to 2.47 over that time.
As immigration now increases, the RBA anticipates a further increase in rental demand, especially in Sydney and Melbourne.
The rental shortage is not being helped by recent flooding.
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A pretty quiet week ahead in Australia, but the following week will hold some interesting new information on the inter-related figures for employment, wage prices, and overseas arrivals and departures.
