Sydney fell for the third month in a row while Adelaide, Brisbane and Perth kept climbing.
The Australian property market in April 2022 told two very different stories. Sydney recorded its third consecutive monthly fall, down 0.2%, while Melbourne flatlined and Hobart posted its first decline in 22 months. At the same time, Adelaide, Brisbane, Canberra and Perth all grew by more than 1% over the month. The gap between the cooling southern capitals and the still-rising markets of Queensland and Western Australia was widening fast.
For borrowers watching the property market, the April data pointed to a turning point. With the RBA signalling rate rises were imminent, understanding where conditions were tightening and where momentum remained became critical.
Capital city snapshot
Sydney had the heaviest weighting in the national home value index and its third monthly fall of 0.2% pulled the combined capitals figure lower. Melbourne flatlined in April after months of soft results. Hobart, which had been one of the strongest performers through the pandemic boom, recorded its first monthly decline in nearly two years.
The growth story played out differently in the north and west. Adelaide, Brisbane, Canberra and Perth all posted monthly gains above 1%. Perth and Darwin were notable standouts, with their rolling quarterly growth trends continuing to accelerate. Perth dwelling values rose 2.4% over the three months to April, compared with just 0.4% in the last quarter of 2021. Internal migration data pointed to a significant shift of residents moving to Perth, reversing several years of population outflows.
Regional markets
Regional Australia continued to outperform the capital cities in April 2022. Combined regional values rose 1.4% for the month, compared with 0.3% for combined capitals. The persistent imbalance between low supply and strong demand was keeping prices higher across regional areas.
Advertised stock levels in regional markets sat around 42% below the previous five-year average. The volume of sales, by contrast, was running about 20% above that same average. Homes were being absorbed quickly into a market with too few properties for sale.
This momentum was expected to slow, however. Affordability had stretched considerably through the pandemic boom. Annual regional growth had already eased from a peak of 22.2% in November 2021 to 16.7% by April 2022, and further moderation was anticipated as rates rose.
Rental market
Rents rose nationally by 2.7% over the three months to April 2022, outpacing the 1.9% growth in housing values over the same period. That divergence was pushing gross rental yields higher across most capital cities, though Sydney and Melbourne yields remained below their long-run averages at 2.5% and 2.8% respectively.
An interesting shift was occurring in the unit rental market. For most of the pandemic, house rents had grown faster than units. In April 2022, unit rents were rising faster than house rents in Sydney and Melbourne. The return of overseas arrivals and the migration of renters toward more affordable unit accommodation were both driving this trend. In Sydney, unit rents rose 3% over the quarter versus 2% for houses. In Melbourne, unit rents were up 3.6% compared with 1.2% for houses.
Rising rates ahead
The RBA’s financial stability review in April 2022 provided some reassurance about mortgage stress. The median repayment buffer for owner-occupiers with variable loans had grown to 21 months of scheduled repayments, up from 10 months at the start of the pandemic. Even with a 2 percentage point rate increase, the median buffer would still sit at around 19 months.
Borrowers assessed since October 2021 had been stress-tested at a 3 percentage point buffer above their loan rate, up from 2.5 points. This was intended to ensure borrowers could still service their loan if rates rose.
To see how a rate change could affect your position, use our borrowing power calculator. For context on where rates were headed at that time, see our article on the RBA interest rate forecast for 2022. Conditions through early 2022 were also covered in our January 2022 property market update.
Common questions
Q: Why was Sydney’s property market cooling in April 2022?
Several factors were weighing on Sydney values by mid-2022. Stretched affordability after two years of rapid growth, rising fixed mortgage rates, and an uptick in new listings were all contributing. With the RBA signalling that cash rate increases were coming, buyer sentiment had also softened. Sydney’s high property prices made it particularly sensitive to changes in borrowing costs.
Q: How do RBA rate rises affect my home loan borrowing power?
When the RBA raises the cash rate, lenders typically pass the increase on to variable rate borrowers within weeks. Higher rates mean higher monthly repayments, which reduces how much you can borrow. Lenders also assess your ability to repay at a rate 3 percentage points above your actual rate, so rate rises affect this buffer as well.
Q: Were regional property markets still good value in mid-2022?
Regional markets were still outperforming capitals in April 2022, but the gap was narrowing. Affordability had stretched significantly through the pandemic boom, and analysts expected growth to slow as interest rates rose and the pool of buyers who could afford regional prices thinned out.