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Highlights
- As per the Australian Bureau of Statistics, dwelling approvals plummeted by 12.9% in October.
- Across Australia, the number of auctions has been the highest this week.
- Analysts at the Commonwealth Bank expects housing prices to drop in the coming years.
With the outbreak of the pandemic, each stage of Australia’s economic recovery has been met with a range of factors that have slowed the revival process. The same is evident with the recent outbreak of the Omicron variant, which has emerged at a time when Australia was all set to open its doors to the outside world.
Despite such speedbumps, Australia has gone from strength to strength with its robust policy measures while removing domestic barriers through a rapid vaccination drive. This has resulted in overall growth in economic indicators and a strengthening of the property market.
However, it appears that the Australian housing sector is finally blowing off some steam, much to the relief of Aussies who, for long, have remained trapped in a market amid soaring prices. As a large number of houses are being put up for auction, the demand side pressure is cooling off gradually.
Australia’s property market has been under immense pressure due to the high influx of buyers who aimed to make the most out of the record low-interest rates. However, with time, demand has magnified to such an extent that the supply has remained highly insufficient in comparison.
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Slower dwelling approvals and clearance rates
According to the Australian Bureau of Statistics (ABS), the seasonally adjusted dwelling approvals declined by 12.9% in October. However, despite the fall, approvals have remained above the pre-pandemic levels. According to ABS, the fall was primarily driven by a large decline in private sector dwelling approvals, excluding housing.
On the contrary, private sector housing rose by 4.3% in October 2021. This represents an increase of 34.3% over the pre-pandemic level seen in October 2019. In the current scenario, experts predict that a slowdown is underway in Australia as interest rates may not remain as low as they currently are.
Additionally, the number of auctions has been the highest this week across Australia, with 4,261 houses going under the hammer (CoreLogic statistics). The volume of capital city auctions exceeded the 4,000 mark for the first time, marking the busiest auction week on record. However, in a surprising turn of events, demand has failed to match pace with the large increase in listings. Consequently, clearance rates have taken a hit, with only 71.4% of the listed houses getting sold.
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Price slowdown ahead?
Given the current scenario, analysts at the Commonwealth Bank have raised expectations of a massive ten percentage drop in housing prices by 2023. This forecast has come as a breath of fresh air for many first-time homebuyers, who have remained locked out of the property market due to affordability concerns.
While some amount of price hike may seep into 2022, a correction in prices would most likely occur a year after that. This might largely come as a result of an increase in the interest rates by the Reserve Bank of Australia (RBA), which could make lending expensive for home buyers.
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