From July to October, interest rate stability hinted at a potential recovery in residential property demand. This was further bolstered by record population growth, supplementing the already moderate local demand. In response, vendors were more willing to list their properties and capitalise on the generally higher selling spring season. As a result, auctions during Q4 2023 were 19% higher than the previous corresponding period.
However, this initial sign of recovery was short-lived – dampened by the 25 basis point rate rise in November. Subsequently, property demand dwindled as prospective buyers grappled with higher interest rates and reduced borrowing capacity, widening the gap between their housing desires and financial realities. Consequently, many opted to postpone their decision to purchase to save up a larger deposit or await more favourable market conditions rather than compromise on their home preferences.
New home demand is weakening after record sales during the 18 months from the start of the HomeBuilder Grant (June 2020). Rising cost of living pressures, higher construction costs, and the rapid 435 basis point rise in the cash rate in a little over one year, are all contributing to cautionary buyer behaviour.
Additionally, developers are restraining new supply to align with lower lot absorption rates, aiming to prevent an oversupply scenario that could drive down lot prices.
Subsequently, there has been a rise in rebates and discounts, offering 5%-10% off the headline lot prices, to stimulate sales activity and clear inventory of lingering titled and near titled lots. While the headline median lot price increased by 1.5% over 2023 to $386,900 in Q4, the actual median lot value likely saw a correction when factoring in current buyer incentives.
This article references findings from our Q4 2023 Economic and Residential Property Market Report.