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Australia
OpinionComment
Nicholas Spiro
Nicholas Spiro

The View | Australia’s property price surge stems from domestic issues, not Chinese buyers

  • The market impact of foreign buyers has been exaggerated
  • Pointing the finger at foreigners is a distraction from the main problem bedevilling Australia’s housing market – a severe shortage exacerbated by the lack of needed planning reform

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A multi-storey block of flats being constructed in Marrickville, Sydney, on August 29. Housing prices in Sydney have risen 8.8 per cent this year, defying months of gloom and broader economic conditions that would suggest a continued fall in prices. Photo: Reuters
Nicholas Spiro
Among the world’s vulnerable property markets, Australia is perceived as being most at risk from the steep rise in interest rates. This is mainly because of a combination of a worryingly high level of household debt and a high proportion of floating rate mortgages.
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Earlier this year, the International Monetary Fund ranked 27 developed and developing economies according to their level of housing market risk. Australia was second only to Canada, which has similar vulnerabilities.

This makes the swift recovery in Australia’s property market following the sharpest and fastest fall in house prices on record all the more remarkable. Having plunged 9.1 per cent between April 2022 and February 2023, home values have since risen 4.9 per cent.

The rebound is sharpest in Sydney – the largest and most expensive market – where prices fell 13.8 per cent between January 2022 and January 2023 but have since surged 8.8 per cent, according to data from CoreLogic.

The Reserve Bank of Australia (RBA) has increased rates by almost 4 per cent since May last year. Given the dramatic rise in borrowing costs and the decline in consumer confidence to levels last seen during a recession, few expected Sydney to recover so quickly. “It’s surprising in the sense that consumer sentiment is signalling recessionary conditions, lending is tight and Sydney was unaffordable to begin with,” said Tim Lawless, executive research director, Asia-Pacific, at CoreLogic.

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One of the factors that has contributed to the rebound in prices is the surge in net overseas migration – driven by the recovery in international student arrivals – since Australia’s borders reopened early last year. The population grew 1.9 per cent in 2022, the highest rate since 2008.
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