After 2-3 months of slight relief in new housing build costs, a significant surge in building costs has been seen within the index once again in September 2022. With new home sales slowing month on month since early 2022, the market was expected to see continued declined in new building costs, however a tight labour market and a huge backlog of new home starts from sales through 2021 have kept costs on the rise.
House Prices Steady over September
House prices steadied over September supporting emerging evidence that the recent shakeout in housing market activity may be bottoming out.
The latest data from My Housing Market reveals that “asking prices” for established houses listed for sale in Sydney fell by just 0.5% over September compared to the previous month, which was a similar result to the 0.6% monthly fall recorded over August.
All other capitals reported marginal increases in asking prices over September with the exception of Perth where prices increased by 0.9%.
Despite some declines in values the last 4-5 months, house prices over 2022 so far have increased in Brisbane up 7.5%, Perth up 7.2% and Adelaide higher by 7.1%. Prices in Sydney and Melbourne however are lower for the year – down by 4.7% and 1.7% respectively.
Monthly Median House Asking Prices – September 2022
| Capital | Price | Month | Year to Date |
| Sydney | $1,412,537 | -0.5% | -4.7% |
| Melbourne | $996,222 | 0.1% | -1.7% |
| Brisbane | $804,120 | 0.3% | 7.5% |
| Adelaide | $714,893 | 0.1% | 7.1% |
| Perth | $665,030 | 0.9% | 7.2% |
Rental Markets Remain Challenging for Tenants
Capital city rents have continued the general trend of recent months with units outperforming houses over September.
Although house rents were steady over the month, all capitals have reported significant rises on house rents over the year ending September with Brisbane the top performer – higher now by a remarkable 20.2%.
Median Weekly Asking Rents – September 2022 (Houses)
Sydney remains the most expensive capital for weekly asking house rents at $650 with Melbourne the most affordable at $490.
Capital city house rental vacancy rates for houses remain at low levels, with Sydney falling over the month; Melbourne, Adelaide and Perth steady; and Brisbane higher.
New Home Building over August
New home building rebounded sharply over August following an unusually steep decline recorded over the previous month, with the ABS reporting a 28.1% increase in seasonally adjusted dwelling building approvals.
The strong reversal in overall dwelling approvals was due to a 99.1% rise in volatile private sector units, with approvals for private sector houses increasing by 4.1% over the month.
Dwelling approvals however remain 9.5% lower than recorded over September 2021, with houses down 14.4% and units lower by 1.2%.
The underlying quarterly trend for both house and unit building approvals is now steadying. However, in the case of new house approvals, with new build sales in decline since early 2022 we should expect to see a continued softening of building approvals (at least for houses) over the next 6 months.
Melbourne remains the clear leader in dwelling approvals over the 8 months ending August and is well ahead of Sydney for both houses and units.
All capitals have reported declines in building approvals for houses over the first 8 months of this year compared to the same period in 2021. Melbourne and Adelaide however have recorded increased approvals for units over the year to date comparisons, with the other capitals reporting declines. This trend in building approvals, coupled with rising immigration in recent months and the expected escalation of further immigration moving into 2023 is likely to put enormous pressure on the supply of housing through 2023/24.
House Building Costs Rise over August
House building costs increased sharply over August following consecutive months of declines according to the My Housing Market National New House Building Costs Index. Although monthly house building costs have now increased by 18.0% over the year ending August 2022, they remain below the recent peak annual rise of 24.3% reported over the 12 months to April this year.
Home Loans Down Again over August
Home lending continues to decline with the ABS reporting that the value of home loans seasonally adjusted (excluding land and alterations and additions) decreased by 2.1% over August compared to the previous month and is now 14.5% lower than reported over August 2021.
Home lending over the first eight months of 2022 has fallen by 3.1% compared to the same period last year. On slightly lower median house prices and a rising interest rate environment this trend is likely to continue for the next couple of months at least.
All states with the exception of WA recorded falls in seasonally adjusted home lending over August, with NSW and SA the underperformers, falling by 7.2%, and 5.7% respectively.
Jobless Rate Higher – But Still Low
Although the national unemployment rate ticked upwards slightly over August, the near record low 3.5% monthly result continues to reflect a booming economy with continuing strong demand for labour.
RBA Raises Rates Again – But By Less
The RBA predictably increased official interest rates over September – the sixth consecutive rise in the current series. The increase of just 0.25% however followed three consecutive monthly increases of 0.5% with rising speculation now that rates may now peak sooner and lower than expected. The recent 0.25% rise was welcomed by home owners, providing a level of confidence to future new home buyers that further rate rises may be minimal.
Comment and Outlook
Capital city housing markets are now showing clear signs of an easing in the severe decline in activity reported over winter – particularly Sydney and Melbourne that led the downward charge in market corrections earlier in 2022. House and unit asking prices have steadied over September with only Sydney and Melbourne reporting marginal falls over the month. An improved home price performance over September is supported by falling average days on market for both houses and units over the month for all capitals.
Weekend auction markets also reported increased buyer and seller activity over September with all capitals recording clearly higher clearance rates despite the distractions of significant holiday periods through the month of September. Improving clearance rates and lower average days on market are all pointing towards a switch back to a sellers’ market in the months ahead.
Rental markets continue to tighten – particularly for units as rising affordability barriers through skyrocketing house rents drive tenants into the typically more affordable unit market. Rental vacancy rates remain at record low levels in all capitals with the exception of Melbourne units where rates however continue to fall sharply. Rental yields are also increasing – particularly for units, driven by sharply higher rents and steady prices overall.
Tight rental markets reflect a chronic shortage of housing nationally with underlying levels of new building remaining well below the peak levels of 5 years ago. Although dwelling building approvals increased sharply over August overall activity is still well below the same period in 2021.
Higher house building costs over August will act to further constrain home building activity.
A strong national economy with record low jobless and rising wages is supporting robust consumer confidence and acting as a catalyst for a revival in housing market activity. Although the RBA has predictably continued to increase interest rates to tackle rising inflation, its latest decision to raise rates by a lower than expected 0.25% over October provides some hope that rates may peak earlier and lower than predicted – and act to further enhance consumer confidence.
The spring selling season has commenced on the front foot following a winter of discontent for housing markets generally. The signs are clearly growing that housing markets – particularly Sydney and Melbourne, may bottom-out over the remainder of 2022 with rising local demand enhanced by a wave of international migrants seeking accommodation in clearly undersupplied housing markets.
Dr Andrew Wilson – Chief Economist My Housing Market
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