A mixed picture is emerging across Australia’s state-based housing markets, as we head to the end of the year.
While Sydney’s red hot first-half saw big disruptions from the COVID lockdowns from July, it's now back in full swing with double digit annualised price growth.
Melbourne hasn’t seen the same level of price momentum – growth is currently a touch below 10 per cent – but a bumper reopening as COVID restrictions lifted was marked by the strongest month ever in terms of sales in October.
Outside the ‘delta’-affected Eastern states, we're seeing solid growth generally, but performance is more varied.
Brisbane's the front runner, with price growth accelerating over the last three months and now running at a strong double-digit pace. Adelaide and Hobart have also seen sustained price gains, both markets very tight in terms of supply.
The real surprise has been a slowdown in Perth. From around the middle of the year, prices tapered right back to single digit growth. The cause of the slowdown is unclear, but it coincides with the end of the Federal government’s HomeBuilder support scheme that had been ‘doubled up’ by a similar measure from the WA state government.
We expect this varied performance across the country to carry into next year, given the mixed bag of macro prudential policy tightening, reopening of external borders and other forces coming into to play.
The big wildcard for 2022 are investors.
Generally speaking, where investors go, housing markets usually follow. The recent revival is a rare counter example where owner-occupiers have led the way. However, affordability pressures are starting to weigh on owner occupier demand and, while investors have been largely absent from the price cycle so far, we’ve seen a recent pick-up in investor activity. Investors lifted their share of loans by value to about 30 per cent, compared to a bottom of about 23 per cent late last year.
While this share is still a long way below the 40 per cent peak during 2016-18, the big question is whether the current resurgence in investor activity will carry to those previous peaks.
In any event, investors look set to be a key ‘swing factor’ for housing from 2022, presenting upside potential near term if they return en masse but also the potential for a more volatile cycle if this draws a more stringent response from policymakers.