Buyer demand is slightly lower than average in many areas as the spring selling season approaches.
Domain’s latest Buyer Demand Indicator Report shows that after peaking in 2021 buyer demand across the combined capitals and regional Australia has eased and is now lower than the three-year winter average.
Chief of Research and Economics for Domain, Dr Nicola Powell said spring would be the first real test of the property market since interest rates started to rise.
“Spring is that time of year, bringing an influx of new listings and rising buyer activity,” Dr Powell said.
“We can’t dodge the fact that conditions will be a little different in spring 2022 compared to the previous two.
“However, a spring market can provide opportunities whether you’re buying or selling.”
Dr Powell said the property market had slowly started to favour buyers over the past few months.
“It may appear that the Australian housing market changed gear overnight,” she said.
“In truth, market dynamics have slowly been on the cool since 2021.
“This was evident to those who intently track the market but has become prominent to us all as property prices fall.”
Across all capital cities and regional Australia, buyer demand hit a high in 2021, apart from houses and units in Perth and units in Adelaide, which peaked later in 2022 according to Dr Powell.
This was also consistent with a period of booming prices, elevated demand and dwindling supply.
Dr Powell said Sydney reached a peak in buyer demand sooner than the other cities, in March 2021.
This is likely due to greater affordability issues associated with a higher median price coupled with the rapid rate of pandemic growth.
It also suggests Sydney is further along the price cycle compared to other cities.
Perth bucked the overall trend and peaked later, in February/March 2022 when the strict Western Australia border controls lifted, supporting another wave of new demand and freely allowing an easier relocation from overseas and interstate.
Adelaide units also peaked later, in February 2022, which reflects the stronger market conditions and the affordable options that units present, as well as higher levels of investment activity.
Dr Powell said since mid-2020 demand for houses across the combined capitals was higher than units for the majority of the time.
“This widened to the highest gap on record in January 2022, clearly emphasising the heightened demand for houses throughout the pandemic,” she said.
“Financial limitations and relative unaffordability are starting to weigh heavier on houses, with the demand gap consistently narrowing throughout 2022.”
Demand for units is higher in Brisbane, Canberra, Darwin, Hobart and Perth, while this is the opposite in Sydney, Melbourne and Adelaide, where the gap between houses and units is narrowing as affordability has become a key restraint for buyers, shifting demand.
Dr Powell said since the October 2021 peak, demand had moderated as wages struggle to keep pace with rising inflation and tightening affordability.
“Across the combined capitals, demand is 32.6 per cent lower for houses and 27.7 per cent lower for units compared to the peak,” she said.
“This aligns to the reduction in home loans financed and housing activity.”
Dr Powell said it was seasonally normal for seller activity and buyer demand to track a little lower in winter.
“Demand over winter 2022 shows there is only a slightly weaker demand compared to the three-year winter average across the combined capitals and remains higher across regional Australia,” she said.
“The level of demand throughout winter 2022 varies depending upon location, with houses and units in Sydney, Melbourne, Brisbane and Hobart, and Canberra houses, lower than the three-year winter average.
Dr Powell said demand remains well above the three-year winter average in regional Australia, Adelaide and Perth ahead of the spring selling season.
“Next week is the start of spring and marks the busiest time for the property market,” she said.
“It will be the first spring in three years unhampered by Covid lockdowns.
“The transition from winter to spring will see a lift in new listings and an emergence of more buyers.
“The rise in properties for sale will test the number of active buyers and whether sellers are meeting market price expectations.
“This will be the first real test of the property market since interest rates started to rise.”