With the conclusion of the fiscal year 2023 (FY23), it’s imperative to dissect the market dynamics that transpired and to project potential trends for the upcoming fiscal year 2024 (FY24).
In a surprising turn of events, FY23 bore witness to a brief yet impactful market correction. Despite the ongoing escalation of interest rates, Australian home values managed to bounce back earlier than expected. This swift resurgence was primarily attributed to a shortage of available properties, which triggered a new market cycle. This trend of limited supply leading the market cycle was particularly evident across the entire East Coast, with Sydney leading the charge.
The unprecedented COVID-19 market cycle between 2020 and 2022 left an indelible mark on the East Coast’s real estate. CoreLogic’s meticulous analysis quantified the magnitude of the transformation, with Queensland emerging as the primary beneficiary. This surge was propelled by a wave of individuals relocating from southern states, seeking a new lifestyle facilitated by remote work opportunities.
Brisbane, in particular, witnessed a remarkable 41.8% surge in home values, while regional Queensland experienced a corresponding 42.6% increase. Other East Coast capitals like Canberra and Hobart saw 38.3% and 37.6% growth rates, respectively. The standout performer was regional Tasmania, recording an impressive 51% growth. In contrast, Sydney, Melbourne, and regional New South Wales reported increases of 24.5%, 10.7%, and 47.6%, respectively.
The ascent of interest rates in May 2022 punctuated the pandemic-induced boom, catalysing an immediate market correction. Despite the unprecedented speed of rate hikes, the Australian property market demonstrated resilience by undergoing a relatively modest decline, in line with the usual correction pattern of around 10%.
Here’s how home values changed across the East Coast’s capital cities and regions in FY23.
- Sydney: -5.7%
- Regional NSW: -10.2%
- Melbourne: -6.7%
- Regional Victoria: -8.9%
- Brisbane: -9.9%
- Regional Queensland: -5.2%
- Canberra: -10%
- Hobart: -12.7%
- Regional Tasmania: -7%
(Source: CoreLogic Hedonic Home Value Index, June 30, 2023)
The persistent scarcity of available homes and robust buyer demand expedited the recovery of capital city markets in early 2023. The resurgence of migrants fuelled demand as renting became less tenable due to escalating rents and limited inventory. Additionally, robust employment numbers played a pivotal role in supporting market strength. On the supply side, dwindling dwelling approvals in FY23 were attributed to escalated construction costs and labour shortages.
Consequently, heightened competition in established housing markets led to price increases. A similar scenario unfolded in the apartment sector, with approvals plummeting well below historical averages. These supply-demand disparities were observed across various price segments.
The signs of a market rebound are becoming increasingly evident in major cities such as Sydney, Melbourne, and Brisbane. Additionally, Hobart and Canberra appear to be on the cusp of a turning point, as CoreLogic’s comprehensive price data analysis suggested.
Notably, the regional areas are also experiencing a shift in trajectory, propelled by ongoing interstate migration. This phenomenon has played a role in mitigating the impact of a comparatively milder correction in these regions.
As many reports highlight, an intriguing ripple effect is unfolding. Buyers are now extending their gaze beyond the bustling, pricier coastal cities, instead seeking value and opportunity in nearby tree change destinations.
CoreLogic’s latest data underscores Queensland’s role in spearheading the resurgence of regional markets. House values have already appreciated by 1.7%, and apartment values by 2.2% since the inception of 2023. Moreover, the data suggests an imminent pivot in the regional markets of New South Wales, Victoria, and Tasmania.
Migration is a pivotal catalyst driving growth in the Australian property market for FY24. The anticipated return of international students, coupled with a strategic approach to welcoming skilled migrants, aims to bridge significant gaps in the labour market. An ambitious projection of 1.5 million migrants moving to Australia over the next five years underscores the country’s attractiveness. While traditional favourites Sydney and Melbourne continue to draw migrants, there is a trend of increasing appreciation for Queensland’s offerings among prospective settlers.
The analysis of the end-of-financial-year market wrap for FY23 offers a deep understanding of the Mackay real estate landscape’s nuances and the factors that influenced its trajectory. The surprise market correction, swift recovery, and the role of interest rate hikes underscore the market’s resilience. The FY23 pandemic cycle highlighted Queensland’s impressive growth, driven by migration and changing lifestyles. Looking ahead to FY24, a promising rebound in major cities and regional areas is anticipated, propelled by continued migration and shifting buyer preferences. This comprehensive overview empowers stakeholders to make informed decisions, highlighting the importance of experienced agents and a keen awareness of supply-demand dynamics in shaping future success.
As the curtains rise on FY24, the Australian property market continues to stand as a compelling arena for growth and transformation. Stakeholders are advised to collaborate with experienced agents well-versed in navigating evolving market dynamics to optimise their selling potential. Moreover, sellers in regional areas should acknowledge the expanded buyer landscape and consider local agents equipped with extensive outreach capabilities to capture diverse audiences.
