With two months of data under our belt, the picture for property market is becoming clearer.

Last year, property values increased almost everywhere, often by double digits. However, that’s not how our property markets typically work or what you should expect of them this year.

Moving forward, you can expect the Australian property market to be segmented, which is normal for Australia. And you’ll see some segments that outperform the others strongly, some that have more moderate performance, some segments where values stagnate, and some segments where price values fall.

That, as well as interest rates, is what you’re going to hear in today’s chat with Dr. Andrew Wilson.

We discuss:

• When is the Reserve Bank going to raise interest rates?
• How high are interest rates going to go this cycle?
• What does the latest wages data tell us and what does that mean for interest rates?

Wages Rise – But Still Well Below RBA Target

• Many commentators and economists brought forward their forecasts for the timing of the first RBA cash rate hike. Some were pointing to the possibility of rate hikes as soon as June this year.
• However, the latest wages data and a likely surge in workers indicate that reaching the RBA’s benchmark of consistent wages growth above 3% per annum won’t occur until next year.
• In fact, “real” annual wages (the difference between wages and inflation) fell by 0.3% over the year to the December quarter
• This is the first fall since March 2015 and second only to the record 0.5% fall recorded over September 2008 during the depths of the GFC.
• We’re not there yet – we haven’t reached a point where an interest rate hike makes sense.

What’s happening in our property markets?

• Our capital city housing markets have continued to report strong results
• The auction markets have commenced the season with higher clearance rates overall compared to the final months of 2021.
• Last year property values increased in almost every location around Australia – and that’s very unusual.
• However, moving forward, the various property markets will be very segmented, which is a more “normal” property market.
• Despite strong buyer and seller activity, and strong auction clearance rates clearly still indicating a seller’s market, property price growth over the month of February produced mixed results.
• Andrew Wilson's My Housing Market showed strong growth in asking prices for properties in Brisbane and Adelaide while house price growth in Sydney and Melbourne has moderated over February.
• While wages around Australia are much the same, the median house price in Sydney is double that of Brisbane and considerably more than the Melbourne a similar house would cost in Melbourne.
• Affordability is now constraining further price growth in more expensive capitals of Sydney and Melbourne as lending capacity has been maximized.
• The smaller capitals – particularly Brisbane and Adelaide continue to provide buyers with affordability advantages
• Housing market demand will continue to be supported by the imminent reintroduction of mass migration and rising confidence in a post-covid recovering economy and reinforced by a clear underlying shortage of housing.
• Investor activity will also continue to support housing markets, with surging rents enhancing yields and supporting total returns.
• The level of price growth will be determined by interest rates and income growth going forward which are likely to remain steady for the foreseeable future.
• The consolidation of affordability in housing markets over time in a normalized economic environment with low interest rates and steady income growth will result in flatter house price outcomes and a more predictable and sustainable housing market.

Links and Resources:

Michael Yardney

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Dr. Andrew Wilson, Chief Economist My Housing Market

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Shownotes plus more here: Where is the property market heading? With Dr. Andrew Wilson

Some of our favorite quotes from the show:

“Even though wages have gone up a bit, most people recognize that it costs them more to live than their wages have gone up.” Michael Yardney

“It was a record month with lots of auctions in February, creating some records in the number of sales.” Michael Yardney

“What you have right now is enough to start.” Michael Yardney

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