The election coincided with the cooler and slower months for Australian real estate, with housing affordability a hot button topic for the 2022 election. Image: Australian Electoral Commission.
  • The election looms large over the market
  • Housing affordability casts a long shadow, short of over 160K homes across the nation
  • The average clearance rate was 69.1% from a total of 32,306 auctions

In Knight Frank’s Australian Residential Market Update for May 2022, the report looked at five events that happened across the month and the likely impacts and happenings about those points.

What’s the cash rate?

Up until 3 May this year, it was 0.1%. That then changed to 0.35%.

That was the first time the Reserve Bank lifted interest rates since November 2010 – the day of the Melbourne Cup  – and the first time it changed the rate at all since November 2020.

As for actual impact, it’s probably a little early to tell, but Knight Frank noted many of Australia’s banks had already lifted mortgage lending rates over the past year anyway.

More first home dreamers

The great Australian dream of owning your own home was quite achievable for a sliver of time in mid-2020. The Knight Frank report said values during the period “… subsided across Australia,” and significant subsidies at both state and federal levels were offered.

Shortly after, the market heated up, and first home buyers were priced out of the market.

The report found that:

“By the end of 2022, … the share of first home (owner-occupier) buyers [shrank] to 29% of all Australian owner-occupier new loan commitments, after rising to 36% in 2020, to now be below the end of 2019 marker of 31%.”

Knight Frank’s Australian Residential Market Update for May 2022

Housing affordability has been a hot button topic throughout the looming election, to be held this Saturday 21 May.

Prior to the official campaign, both parties announced housing guarantee schemes, with the final week of campaigning seeing the Liberals announce early super access as a policy.

Lower clearance rates

The report found auction activity slowed down across most of the major cities through the first four months of this year.

The average clearance rate was 69.1% from a total of 32,306 auctions.

The first four months of 2021, however, were some ten percentage points higher at 79.1%, with 25,336 auctions. In the last few months of 2021, the clearance rate was 73.2% from 49,092 auctions.

Dwelling price growth has also been subdued, a 0.7% price growth in March 2022 was reduced to 0.6% price growth in April. The market is still 16.7% higher than one year ago.

A broader appeal

Knight Frank’s report also found an uptick in international buyers into the Australian real estate market, March 2022 recorded 7.9% of new residential property purchases coming from overseas. That figure was 3.7% a year ago.

The report also noted that the Australian government continues to encourage foreign investment into the residential property market and has not proposed any changes to the Foreign Investment Review Board application process framework. The opposition, however, plans to double the application fees and financial penalties to pay for the proposed housing affordability policies.

A sapling change

Not quite a tree change or sea change, but moving to the outskirts of a city was a trend noted by the report.

Housing supply continues to cast a long shadow over the market, with the NHFIC forecasting Australia to be 163,400 homes short of demand between 2025 and 2032.

While new residential sites purchased by developers have been declining over the years, larger numbers of low-density sites have been sold on the outskirts of the greater city boundaries, according to the Knight Frank report.

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