Declines in the combined value of all property sold will accelerate this year as lower prices spread nationally, dragging down the total, conveyancing platform PEXA said as it published new settlements data.
Transaction data from the ASX-listed operator shows the downturn that hit the east coast-dominated housing market in the second half of the year pulled the value of all residential and commercial settlements to $674.5 billion from $688 billion in 2021.
Although transaction numbers were likely to decline in line with last year’s 11.8 per cent contraction – which pulled total settlements down to 733,314 nationally – the decline in values could expand to 5 per cent, PEXA’s chief economist Julie Toth said.
“Higher loan costs will cut housing transaction numbers this year as much as they did last year, but settlement values will more than double from the 2022 figure of 2 per cent,” Ms Toth told The Australian Financial Review.
The downturn was also likely to mature as the declines that started in the NSW capital – which would now likely stabilise – widened to other cities, she said.
“At the moment, it’s very much a Sydney story,” Ms Toth said. “We haven’t seen much of a fall yet in other markets.”
Tuesday’s 0.25 percentage point increase in the benchmark lending rate and next month’s likely further additional increase – with a possible pause in April and May – would cut the borrowing capacity of home buyers and hold down prices, she said.
“They’ve got less available,” Ms Toth said. “The vast majority of Australian property settlements do depend on having a mortgage in place. They are completely dependent on how much they can borrow. That really puts the lid on the amounts they can offer.”
NSW is leading the pack with the cycle. It’s got a bigger proportion of property volumes falling, then Victoria and then Queensland.
— PEXA chief economist Julie Toth
ASX-listed PEXA’s data shows that lower-priced residential properties have been hit harder by the cycle of rising rates that started in May. This was most apparent in NSW, where markets in the south-western suburbs of Sydney were the first to suffer from higher rates.
Sales volumes of homes priced under $500,000 in NSW sank nearly 35 per cent from 2021. Volumes of dwellings in all price bands fell, with those in the $1 million to $1.5 million range falling the least, with a 2.2 per cent decline.
In Victoria, volume declines were also concentrated at the lower end, with sub-$500,000 home sales contracting 24.4 per cent and $500,000 to $1 million homes declining 7 per cent. Volumes of higher priced dwellings increased year-on-year in the southern state.
In Queensland, only the lowest-priced, sub-$500,000 property band suffered a volume decline, falling 12.8 per cent, the PEXA figures showed.
“NSW is leading the pack with the cycle. It’s got a bigger proportion of property volumes falling across all those value points, then Victoria and then Queensland. It’s telling the story of the sequence of the cycle,” Ms Toth said.
“What we are likely to see in 2023 is NSW starting to stabilise, but bigger price falls elsewhere as they follow that pattern.”
The residential market in south-east Queensland that enjoyed strong pandemic-driven population growth from interstate that had not yet unwound, would be shielded partly from the effects of rising interest rates by continued strong demand, Ms Toth said.
“That might help to keep prices and sales volumes stronger,” she said.
Queensland led the nation by number of sale settlements last year with 194,849, down 12.6 per cent from 223,035 in 2021.
NSW suffered the biggest decline in volumes, down 18.1 per cent to 177,555 sale settlements from 216,799 in 2021.
Victorian settlement volumes fell 10.6 per cent to 185,096 from 206,984.
Of the smaller jurisdictions captured in PEXA’s numbers – which are adjusted to come up with nationally representative figures – Western Australia settlement volumes slipped 3.6 per cent to 91,051 from 94,416, and South Australia volumes fell 8.5 per cent last year to 51,215 from 55,961.
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