A New Financial Year and Changing Property Market

A New Financial Year and Changing Property Market

Looking back over the past financial year, the national property market has shifted from a strong sellers’ market to a more neutral setting. If we think back to July 2021, buyer demand, from first home buyers, owner-occupiers and investors, was strong, stock on the market was tight, and interest rates were at record low levels.

The result of this was very strong price growth and a record number of sales transactions. This shifted towards the end of FY22, as cost of living pressures weighed on household budgets, interest rates rose, and low levels of affordability softened buyer demand.

There are a number of key areas to look out for over the coming financial year, which are outlined below.

Interest rates

Interest rates were at record low levels over the majority of the past financial year, with the RBA increasing the cash rate, by 0.25 percentage points, for the first time since 2010, at its May meeting this year. This was followed by another 0.50 percentage point increase in June, meaning the cash rate started FY22 at 0.10% and finished at 0.85%.

Ongoing concerns over rising inflation due to supply chain, issues, global conflicts, and domestic demand is set to see the cash rate, and mortgage rates, continue to rise over the course of FY23. This will see the strength of buyer demand continue to ease as they reassess their budgets, borrowing capacity and the ability to service a mortgage. However, from a historical context interest rates remain low, and banks are still competing to attract borrowers with good deals.

Population changes and regional markets

Regional markets were a standout performer over FY22, driven by strong population growth. Higher levels of affordability, the desire for a more laid-back lifestyle and the ability to work from home saw many relocate from capital cities to smaller regional centres and rural towns.

The level of population movement is evident in the latest ABS population data which showed that New South Wales lost a net 35,000 residents and Victoria lost a net 19,000 residents to another state during the 2021 calendar year. The majority of these residents moved to Queensland which gained a net 50,000 new residents during the same period.

The movement to regional and interstate locations is expected to continue during FY23, as first home buyers look for more affordable locations and young families, seeking more space, find a large home in smaller centres outside our capital cities.

Property listings

A lack of new property listing’s coming onto the market for sale has been a key contributor to the strong price growth experienced over the course of the past year. New listings did improve mid-way through FY22, however, the absorption rate was very fast and properties were selling quicker than they could be replaced, meaning total listings remained low. As we finish FY22, new listings remain -2.0% below where they were last year and total listings -7.4% below last year, according to CoreLogic.

Looking forward, new listings coming onto the market will slowly rise from the current low levels. This will be particularly driven by those that are looking to capitalise on the equity built-up in their homes from the strong price growth of recent years.

However, we don’t expect an “oversupply” of properties on the market, as rising interest rates combined with cost-of-living pressures will see a lot of vendors sit on their hands and wait until the next upswing.

Low unemployment rates will allow property owners to ‘wait and see’ and observe the market dynamics, as improved job security provides confidence that they will be able to cover higher mortgage repayments.


The strength of investor activity rose over the course of FY22, as they sat out and sold down their properties during 2020. This increase in activity coincides with rising rents and increased demand for short-term accommodation from domestic tourism. The increase in tenant demand has seen vacancy rates fall to very low levels with a distinct lack of rental accommodation available in a vast number of inner-city, suburban and regional markets.

Investors' activity is expected to continue to rise over the course of FY23, this will be particularly evident in those markets that are experiencing high rental growth and falling dwelling values which will see investors target higher-yielding areas and properties.

First Home Buyers
First home buyers were very active over the start of FY22, assisted by government grants and low-interest rates. However, this high level of activity has fallen as interest rates and cost of living pressures increased and government stimulus measures were wound back.

Over the next financial year, we expect first home buyers to be active in the market, however, at a lower level than in the past two years. There are still government incentives for first-home buyers in place with schemes available that reduce the size of deposit needed to purchase a property, as well as grants and stamp duty exceptions.

The new Federal Government has also proposed a shared equity scheme which will also generate interest from new home buyers.

Looking forward

Overall, the Australian property market is moving through the next phase of its cycle. This will see it swing from the sellers’ market we saw last year, through the current neutral market and into a buyers’ market as stock levels and interest rates rise towards the end of the year.

There is still pent-up demand from those buyers who missed out on securing a property over the past two years. However, now that the competitive heat has dissipated, particularly in Sydney and Melbourne, these buyers are taking their time to look around and make sure the property they choose suits their needs. This contrasts with what we have seen over the past little while, where people were jumping in and trying to secure any property because the market was moving so fast.

The affordability factor makes Sydney and Melbourne more susceptible to a slow down when interest rates rise. Other markets such as Brisbane, Adelaide and Perth are still seeing still low levels of stock, prices are still rising, and better affordability has resulted in steady buyer demand. Slower price growth and falling dwelling values will be a feature of next year, however, overall the economic and property market fundamentals are strong enough to ensure any decline will be measured.

DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.

More interesting resources you might like...