John McGrath - EOFY Wrap And Trends For FY23 | McGrath
John McGrath - EOFY Wrap And Trends For FY21

John McGrath - EOFY Wrap And Trends For FY23

John McGrath
John McGrath
20/07/2022 | 3 MIN READ

The property boom has created phenomenal new wealth for Australian homeowners, and for the first time, we’ve seen this play out in equal measure across the cities and regions.

Australian house and apartment owners now have a median $200,000 in new equity since COVID-19 began in February 2020. That’s life-changing and opens up many opportunities.

Let’s take a look at the performance of the East Coast’s capital cities and regions in FY22.

Median house price growth

  • Sydney +6.8%
  • Regional NSW +21.9%
  • Melbourne +3.5%
  • Regional Victoria +15.6%
  • Brisbane +27.4%
  • Regional Queensland +21.7%
  • Canberra +15.8%
  • Hobart +13.6%
  • Regional Tasmania +21.6%

Source: CoreLogic Hedonic Home Value Index covering the 12 months to June 30, 2022

Major trends of FY22

The pandemic sparked many new lifestyle and buying trends that continued this past year, with the lowest interest rates of our lifetimes providing a big incentive to trade up.

As discussed in our McGrath Report 2022, working from home is the new norm and this continues to prompt many millennial families to relocate to the outskirts of capital cities or to regional areas where they can afford larger homes on smaller loans.

The latest data from the Australian Bureau of Statistics (ABS) shows that for the first time in 40 years, we’re seeing greater population growth in the regions than in our capital cities.

This population movement has led to a re-rating of regional home values. The latest data shows a 25%-35% annual gain in house prices in key lifestyle markets.

These include the Hunter Valley (ex-Newcastle) NSW, the Southern Highlands & Shoalhaven NSW, the Capital Region NSW, the Mid-North Coast NSW, the Gold Coast QLD, Wide Bay QLD, the Sunshine Coast QLD and Launceston & North East in Tasmania.

First home buyer activity tapered off a bit in FY22 due to affordability. However the Albanese Government’s new programs to assist young buyers may have a positive impact for this sector of the market.

These include the shared equity program, Help to Buy, where the government will pay up to 40% of the purchase price for new homes and 30% for established homes.

The Regional First Home Buyer Support Scheme will give a leg-up to an additional 10,000 young people and will run alongside the existing First Home Guarantee.

The pandemic has re-popularised holiday homes, which are serving the dual purpose of being smart investments while providing safe and hygienic vacation destinations.

The international border reopened in February 2022, enabling thousands of overseas students and migrants to return, which has directly boosted inner city rental markets.

Renovating or building has become difficult with a shortage of raw materials and tradie labour causing rising costs and delays. ABS data shows the cost of building in Australia has hit a record high, with people paying an average of $75,000 more for their new homes.

This is translating into higher demand for renovated homes, as many people abandon planned projects and go back into the market to seek an established property.

The prestige market continued its rise in FY22 with inflation and interest rates having less of an impact. A shortage of homes for sale and strong demand from upgrading locals and returning expats is pushing luxury home prices northwards.

Gold Coast prestige values increased by 17.1%, which is more growth than the preceding four years combined. Prestige values in Sydney, Brisbane and Melbourne rose by 16.2%, 11.2% and 9.4% respectively.

Sydney and Melbourne are now cooling and are about halfway through their corrections. If you buy in 2022, you can be confident of getting a 5%-10% discount on last year’s prices.

The pace of growth in Brisbane has been slowing for months, but prices are still going up. I think Queensland has a lot going for it. Compared to Victoria and NSW, it is still relatively affordable and the Olympics are going to have a positive impact.

Canberra has decoupled from the smaller capitals to join Sydney in the $1 million median club for houses. It has overtaken Melbourne as our second most valuable capital city market.

Looking ahead to FY23

Rising interest rates and inflation have taken some exuberance out of the property market, with buyers now less inclined to outbid competitors by large margins at auction.

There’s a period of consolidation ahead after such big price gains nationwide. Late last year, the previous cycle was overheating and we need a breather now. If interest rates stop at 3.5%-4%, that is still half what Australians have paid historically.

The price pullback might be up to 10% on the East Coast, but we are not going to see a major crash.

I think the whole country will have a soft landing off the back of this correction. I don’t think anyone is going to be badly damaged. Most Aussies are still well ahead in terms of their investments and mortgages.

However, in changing market conditions, your choice of agent is even more important. Always list with an experienced local expert who has seen market shifts before, and is supported by a strong agency brand to ensure you maximise your sale price.