June 2023 Market Update

Australian and New Zealand Real Estate Market Update for June 2023

The Australian real estate market continued to recover in June, with housing values rising in all capital cities except Hobart. However, the pace of growth has slowed, as rising interest rates and economic uncertainty weigh on sentiment.

The CoreLogic Home Value Index rose 1.1% in June, following a 1.2% gain in May. This brings the national measure of housing values up 3.4% since February, but it remains 6% below its peak levels in April 2022.

Sydney led the recovery, with dwelling values rising 1.7% in June. Melbourne followed with a 0.7% increase, while Brisbane and Adelaide both rose 1.3%. Perth was the strongest performer, with dwelling values up 0.9%.

Regional housing values also trended higher in June, albeit at a slower pace than the capitals. The regional composite index rose 0.5%, bringing it up 1.8% since February.

New Zealand Real Estate Market

In New Zealand, the market has experienced a downturn in recent months. National housing values declined by 1.2% in June, contributing to an annual rate of change of -10.2% compared to the same period last year. The impact of a prolonged rate hike cycle and stretched mortgage affordability has constrained demand and accelerated the decline.

Despite the challenges, several factors offer support to the New Zealand housing sector. These include high net overseas migration, under-supply of housing, and a labor market expected to remain stable. The country’s net overseas migration is predicted to reach a record-breaking 400,000 this year, further highlighting the demand for housing.

Outlook and Factors to Consider

While the housing market recovery has gained momentum in the past four months, uncertainties persist due to factors such as potential interest rate hikes, weaker economic conditions, and stretched household balance sheets. The trajectory of interest rates will be a critical factor in the performance of the housing market.

Furthermore, the upcoming expiration of fixed-rate mortgages and the resulting increase in mortgage rates for borrowers could lead to a significant shift in the market. The Reserve Bank of Australia estimates that around 880,000 fixed-rate mortgages will expire in 2023, potentially increasing rates from 2% to 6%. This change may influence the housing market by freeing up more stock.

Overall, the outlook for the Australian and New Zealand real estate markets is uncertain. The pace of growth is likely to slow in the coming months, but there are still some positive factors that could support the market.

Key Takeaways

  1. Australian and New Zealand housing markets continued to recover in June, but the pace of growth has slowed.
  2. Rising interest rates, economic uncertainty, and stretched household balance sheets are weighing on sentiment.
  3. Net overseas migration is expected to remain strong in the coming months, which will help to support demand for housing.
  4. The labor market is also expected to remain strong, which will provide support for household incomes.
  5. The outlook for the Australian and New Zealand real estate markets is uncertain, but there are still some positive factors that could support the market.

Disclaimer: The information provided in this blog is based on available data and should not be considered financial or investment advice. Please consult with a professional real estate or financial advisor for specific guidance related to your situation.

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