Property prices have gone up nationally for first time in 11 months, despite rising interest rates.
CoreLogic data shows the median value of properties sold across the country went up by 0.6 per cent in March.
The property data firm's analyst, Tim Lawless, said the reversal of the housing market's 10-month downturn would have been nearly unforeseeable just three to six months ago.
"It's come a lot earlier than expected," Mr Lawless told ABC News.
There is some divergence, however. The growth is coming from Australia's biggest capitals, while smaller markets — such as Darwin and Hobart — are still experiencing a downturn.
Mr Lawless said growth in Sydney was being fuelled by the top end of the market, with cashed-up investors potentially getting back into the high-end market after a period of uncertainty.
The 1.4 per cent monthly gain has pushed Sydney's median property price back above the $1 million mark again.
Apartments and units, however, are not selling for as much.
Mr Lawless said there were several factors that could be contributing to rising property prices.
The economist argued the biggest factor is the number of homes up for sale is still at below-average levels. This means buyers have less choice, which is contributing to higher prices.
"We are seeing very low supply and, even though demand has dropped as well, we've seen supply drop a lot further," he said.
Interest rate shock over?
He also said the housing market is getting over its interest rate shock.
The Reserve Bank of Australia has hiked the cash rate for 10 months in a row and it is sitting now at 3.6 per cent. That has been curtailing mortgage lending, leading to economic uncertainty.
Economists are divided on whether the central bank will hike the cash rate again at its meeting tomorrow, as early signs appear that consumer spending is slowing and inflation is easing.
"It's looking more and more like we're probably at the peak of the rate-hiking cycle, or nearly there," Mr Lawless said.
"For a lot of buyers and sellers, this will work towards improving the level of confidence in the marketplace and, maybe, start to see activity picking up a little bit, even offsetting the normal seasonal slump we see through winter."
The Commonwealth Bank's head of Australian economics, Gareth Aird, is narrowly tipping a pause in rates on Tuesday, although he does expect one more hike to a cash rate of 3.85 per cent before the RBA is done.
But even if rates do not rise tomorrow, Mr Aird said the rate rises already in place should have produced a greater fall in property prices.
"Our forecast for a national decline in home prices from peak to trough of around 15 per cent now looks a little pessimistic in light of the March result, but we retain it for now," he noted.
"The RBA's hiking cycle has so far reduced borrowing capacity by almost 30 per cent, notwithstanding that the average standard variable rate has risen by less than the cash rate due to competition amongst lenders for borrowers."
Lastly, Mr Lawless also said the return of migration — which is now back above pre-pandemic levels — is putting extra pressure on the already very tight rental market.
He assumes that is pushing some new migrants into buying a home straight away, if they can afford it.
Mr Aird agreed the unusually large surge in migration is playing a significant role.
"Any conventional model of home prices indicates further falls should be expected," the economist said.
"But in many respects these are unconventional times. New housing starts are declining at the same time as population growth has surged due to net overseas migration.
"As a result, the rental market is red hot and vacancy rates are at very low levels across the country. This is no doubt supporting dwelling prices and complicates the forecasting process."
Data from the Australian Bureau of Statistics released on Monday morning showed national home loan commitments (excluding refinancing) fell 0.9 per cent in February to $22.64 billion in seasonally adjusted terms.
The amount of first-home buyers getting into the market continued to decline at a sharp rate of 3.5 per cent. Fewer loans were also given out to investors and owner-occupiers, but the rate of decline here was easing.
There was some discrepancy in the data. NSW actually saw a lift in loans, which BIS Oxford Economics' senior economist Maree Kilroy put down to the introduction of the First Home Buyer Choice scheme in late 2022.
"This is helping to facilitate turnover and put a floor under prices in the Sydney market," she noted.
"The sharp run-up in borrowing costs is set to push a growing volume of households into mortgage stress, resulting in a higher rate of pressured selling that outweighs the positive leads of recent price stabilisation over the second half of this year.
"This is expected to prolong the national decline in prices, with falls set to stretch to the end of 2023."
Rents still rising in major capitals
CoreLogic's data has bad news for the one-in-three Australians who rent.
It shows the worst rental hikes nationally appear to be over, but prices are still going up in key cities such as Sydney and Melbourne.
The highest spikes appear to be hitting big city apartments, with unit rents up 18.1 per cent in Sydney in the past year, 16.1 per cent in Brisbane, and 14.6 per cent in Melbourne.
Mr Lawless said one of the biggest influences on rising rents is a lack of availability.
This means renters have fewer choices about where to go, even when they're hit with a rental hike for their current lease.
"We saw the vacancy rate drop to a new record low in March, at just 0.9 per cent across the combined capital cities," Mr Lawless said.
"I think any tenant is probably looking to stay in their lease for longer rather than brave the very tight rental market conditions."
More than 100,000 more homes needed with 46,500 households already homeless
A federal body report also out on Monday reiterates chronic rental shortages are expected to continue for years.
The National Housing Finance and Investment Corporation (NHFIC) estimates that, conservatively, around 331,000 households are already in rental stress, and around 46,500 households are experiencing homelessness.
It estimates 190,000 more households will form between 2023 and 2033.
The NHFIC modelling shows not enough properties will be built to catch up to this demand, with a deficit of around 106,300 dwellings, cumulative, expected over the five years to 2027.
“The rapid return of overseas migration — together with a supply pipeline constrained by decade-high construction costs and significant increases in interest rates — is exacerbating an already tight rental market," NHFIC chief executive Nathan Dal Bon said.
"NHFIC analysis shows housing affordability and supply are likely to remain challenging for some time, underscoring the need for a holistic approach to mitigate the housing pressures Australians are facing.”
The report's release comes as the Labor government's Housing Future Fund to build new affordable properties remains stuck in limbo in the Senate,
Federal Housing Minister Julie Collins said the report reiterated by the fund was needed.
“This report is another reminder that too many Australians are struggling to secure safe and affordable housing,” she said.
The report also said the availability of serviced land, higher construction costs, ongoing community opposition to development, and long lead times for delivering new supply are other factors hindering the development of new housing.
Meanwhile, the Reserve Bank of Australia (RBA) has also been arguing for a while that the change in how and where Australians decided to live during the pandemic was one reason why rents did not drop sharply in most areas.
That, it notes, is despite the surge of emigration early in the pandemic and population stagnation while borders were closed.
NHFIC's analysis agrees with this:
"The premium for space at home, with ongoing work from home arrangements following the pandemic, has contributed to reducing average household size. This has been a factor in sharply falling vacancy rates," the NHFIC notes.
Mr Lawless expects this trend towards bigger homes to reverse as the rental crunch continues. He suspects it may already be happening, as people simply having no other option but going into share houses or renting out spare rooms.
"There is some signs that rental growth is starting to ease off a little bit," Mr Lawless said.
"I think this probably reflects simply the fact that renters are approaching a ceiling and what they're willing or able to pay, rather than any rebalancing in the supply demand equation for rental markets."
Mr Lawless agrees with the NHFIC that more apartments need to be built.
He notes that even Labor's Housing Future Fund will take years to ramp up to construction phase of social and affordable housing, if it passes the Senate.
"The reality is there's not a great deal of immediacy from any government initiatives at the moment for a problem that really needs a very immediate solution," Mr Lawless said.
Data out from the Australian Bureau of Statistics on Monday morning showed a 4 per cent lift in dwelling approvals in February.
"This is another weak result for approvals, with the monthly improvement coming off a January that was the worst result in over a decade," BIS Oxford Economics' Maree Kilroy said.
"Most signs point towards a protracted downturn for dwelling approvals that will extend through 2023 and into 2024. Given the sizeable backlog of work, it will take much longer than usual for this to be felt on-site.
"Australia has a deficit in housing that is particularly obvious in the rental market at the moment. Falling approvals means fewer dwelling completions mid-decade. This will act to sustain the dwelling shortage well into the back half of this decade."
