The residential property market has bottomed out

1. Auction clearance rate has been over 70% for Melbourne and Sydney since the start of 2023 (Figure 1 and Figure 2).

Auction clearance rates are a key indicator of the health of the property market, reflecting the level of demand for properties among buyers. The increase in clearance rates from around 70% in February to 80% last weekend suggests that buyers are becoming more active in the market, especially in Melbourne and Sydney, two of Australia’s largest and most important property markets. Over years, we found that constant auction clearance rates of over 70% indicates a rising market given a stable purchasing power of the buyers. The first quarter sales data does show a moderate increase in property value in most of the capital cities.

Despite the possibility that the high auction clearance rate in the first quarter was partly due to the seasonally low stock level, it is worth noting that when compared with clearance rates in the previous strong markets during the same period, it still suggests a robust market.

2. Historically low rental vacancy (Figure 3).

The historically low rental vacancy rate is also contributing to the recovery of the property market in Australia. A low rental vacancy rate indicates that demand for rental properties is high, which in turn drives interest in the property market more broadly. This trend is particularly notable in cities such as Sydney and Melbourne, where rental vacancy rates have fallen to below 1% recently. 

A lower-than-average rental vacancy rate always implies that there is a shortage of properties on the market either for sale or for rent.  This signals a strong market for sellers.

3. Population is growing fast (Figure 4).

Another important factor contributing to the recovery of the property market in Australia is the increase in immigration since the borders were opened. The COVID-19 pandemic led to a significant decrease in immigration, as the borders were closed to non-citizens and non-residents. However, with the recent opening of the borders, there has been a significant increase in immigration to Australia, which further fuels the property market. Immigrants often need to find housing when they arrive in a new country, driving demand for rental properties and for-sale properties alike. In addition, immigration can increase consumer spending and drive growth in industries such as construction and hospitality, contributing to a stronger property market.

In summary, the combination of rising auction clearance rates, historically low rental vacancy rates, and an increase in immigration suggests that the property market in Australia may be on the upswing, with more opportunities for buyers and investors in the coming months. However, as with any market, caution is advised, and factors such as location, property type, and overall economic conditions should be carefully considered before making any decisions.