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The REA Group Property Demand Index dropped by 4.3 per cent nationally in April, as APRA’s cooling measures and major banks’ tightening of lending rules start to kick in.
REA Group chief economist Nerida Conisbee says it’s likely the Easter long weekend and ANZAC Day also had an impact.
However, she also also said demand is still “well above” the same time last year and higher than the previous peak in November 2016.
“In December 2016, demand also dropped slightly when the banks increased interest rates independently of the RBA. However, buyers ploughed back into the market in January and by March we hit another peak in demand,” Ms Conisbee said.
“It’s impossible to predict if this will happen again and if buyers are purely reacting to the changes. Time will tell as we head into winter.”
New South Wales experienced the biggest drop in buyer demand in April, driven by unaffordability cutting buyers out in Sydney, the index revealed.
“So are we finally at the peak? It’s unlikely in Sydney, but lower levels of demand means that price growth will moderate and April median national house price data suggests the market slowed considerably during the month,” Ms Conisbee said.
“Rental demand also saw a decline in April, suggesting that high levels of investor activity has now provided sufficient rental housing.”
She added that it is likely that rental rates will continue to moderate.
New South Wales
New South Wales recorded the biggest drop in buyer demand in Australia in April.
Given relatively low levels of development compared to Queensland and Victoria, apartment demand has surprisingly declined significantly in 2017. Due to the high house prices, Sydney buyers are most sensitive to banks increasing rates, which are expected to continue to rise.
Victoria
Despite high levels of supply, Victoria saw only a relatively small drop in buyer demand in April. Rental demand also declined, suggesting investor activity is now providing sufficient rental housing for tenants.
These drops suggest that price growth for buyers and renters will continue to slow.
Queensland
Queensland experienced the second highest drop in buyer demand in April after New South Wales. However, demand is still higher than it was 12 months ago.
Rental markets are showing worsening conditions driven by high levels of supply, as well as relatively slow jobs growth.
Rental demand is lower than it was 12 months ago.
The situation in Brisbane is different to on the Gold Coast. Gold Coast suburbs continue to see high levels of demand from buyers and renters due to lower levels of supply, and the Commonwealth Games and other spending on infrastructure supporting jobs growth.
South Australia
Buyer demand in South Australia saw a decline in April, consistent across most states and territories. However, demand remains slightly higher than it was 12 months ago.
High levels of apartment development have led to poorer demand conditions for this type of housing and demand is now down year-on-year.
Rental demand remains resilient, with only a small drop over the month and growth continuing year-on-year.
This suggests that jobs growth is solid in South Australia given the disconnect between buyer and renter demand.
Tasmania
There is still strong buyer demand in Tasmania, but the index fell slightly in April.
Demand for houses continued to rise, but the index fell for units, while renter demand also showed a decline.
Even with the decline, there is no guarantee that prices will fall, with the index continuing to be up on the same time last year.
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