Regional markets surged while Sydney and Melbourne began to stall.
The property market in March 2022 told two very different stories. Nationally, CoreLogic data showed dwelling values rose 0.7% for the month and 2.4% for the first quarter of 2022, adding roughly $17,000 to the average Australian home. But beneath those national figures, a clear divide had opened up between the country’s two largest cities and almost everywhere else.
National overview
The national annual growth rate came in at 18.2% for March 2022, falling below the 20% mark for the first time since August 2021. That softening was largely driven by Sydney and Melbourne, where quarterly growth had slowed sharply from the peaks recorded in mid-2021.
Sydney’s quarterly growth rate had fallen from a peak of 9.3% in the three months to May 2021 to just 0.3% by the first quarter of 2022. Melbourne told a similar story, dropping from 5.8% in April 2021 to 0.1% over the same period. Both cities saw flat or slightly declining values during March itself.
In contrast, Brisbane, Adelaide and Perth each recorded strong monthly and quarterly gains, and regional Australia continued to outpace the capital cities by a significant margin.
Regional surge
Regional Australia was the standout performer of the March 2022 quarter. Regional dwelling values rose at more than three times the pace of the combined capital cities through the quarter, recording 5.1% growth compared to 1.5% for capitals.
Total advertised housing stock in regional Australia sat 43% below the five-year average, a clear sign that supply could not keep up with demand. That pattern had been consistent since early 2021, with the rolling quarterly growth rate in regional dwelling values holding above 5% continuously since February 2021.
The population data helps explain the trend. ABS figures for financial year 2020-21 showed the number of people living in regional Australia grew by 71,000, while the population of capital cities actually fell by around 26,000. Remote working, lifestyle priorities and housing affordability all contributed to that population shift. Buyers considering regional locations should check their borrowing power before comparing regional and city prices.
Capital city split
The divergence between capitals was striking. While Sydney and Melbourne cooled, Brisbane and Adelaide recorded some of their strongest conditions in years.
Advertised stock levels in Brisbane and Adelaide remained more than 40% below the previous five-year average, compared to Sydney where supply sat just 2.6% below average, and Melbourne where it was actually 8% above. Low stock and persistently high buyer demand kept prices rising strongly in those two markets.
Preliminary transaction volume data for the March quarter tracked 14.3% lower than the same period in 2021, though it remained 12.2% above the previous five-year average. That suggested demand had come off the boil somewhat but remained well above normal levels across the country.
For a broader picture of how the market evolved through this period, see our coverage of the property market in April 2022, when Sydney’s decline accelerated and the national picture shifted further.
Rental market
The rental market remained tight heading into April 2022. Annual rental growth eased slightly from a recent peak of 9.4% in November 2021 to 8.7% over the 12 months to March. Unit rents were rising faster than houses, with unit rent growth reaching a cyclical high of 3% in the March quarter versus 2.4% for houses.
Sydney recorded a particularly strong lift in unit rents, up 8.3% over the 12 months to March. Melbourne unit rents rose 6.9% over the same period. The return of international migrants as Australia reopened its borders was expected to maintain strong rental demand in coming months, particularly in inner-city unit markets.
For investors, the high rental demand environment created a compelling case to keep or add to their portfolios, even as some purchase markets began to soften.
What came next
Consumer confidence fell to its lowest level in around 18 months by March 2022, reflecting a combination of slowing property market conditions, rising fixed mortgage rates and persistent affordability challenges.
However, several factors offered some support for the market outlook. Australia had reopened its international borders and migration was expected to increase, supporting demand for housing particularly in capital cities. A strong labour market and rising wages growth were expected to keep distressed selling to a minimum.
The federal government also announced a significant increase in places under its existing home guarantee schemes and introduced a new Regional Home Guarantee, which was designed to support buyers in regional markets that had been attracting strong interest. If you purchased or were considering a property during this period, our January 2022 property market update gives useful context on the conditions leading into this phase.
Common questions
Q: Why did Sydney and Melbourne property prices slow in March 2022?
Several factors contributed. Rising fixed mortgage rates were reducing borrowing power for new buyers. Affordability had become stretched after the strong price growth of 2021. At the same time, supply was rising in Sydney and Melbourne, with advertised stock closer to long-term averages than in other cities. Together these factors reduced buyer urgency and put downward pressure on prices.
Q: Which cities grew fastest in the March 2022 quarter?
Brisbane and Adelaide recorded the strongest capital city growth in the March 2022 quarter, supported by very low stock levels and strong buyer demand. Perth also performed well. Regional areas across Australia outpaced all capital cities, rising 5.1% over the quarter compared to 1.5% for the combined capitals.
Q: Did the March 2022 slowdown signal a property crash?
Not immediately. The national market continued to grow through the quarter, and strong fundamentals including low unemployment, rising wages and returning migration provided support. However, the RBA’s decision to begin lifting the cash rate from May 2022 onward did put increasing pressure on values in subsequent months, particularly in Sydney and Melbourne.