Amidst a backdrop of continued high interest rates, property settlement volumes were down in the financial year ending June 2023, compared to the record-highs of FY22, but green shoots appearing in the second half of the financial year show positive signs of recovery – according to new research released by PEXA today.
PEXA’s FY23 Property Insights Report found more than 665,000 property settlements were recorded nationally in FY23, which was 18.6% lower than the previous boom year of FY22 (754,352), but remained 11% higher than immediately prior to the COVID pandemic in FY20. This was driven by a soft first half, with all states recording some shrinkage. However, settlement numbers recovered from March 2023 onwards and the financial year finished strongly with more than 66,000 property settlements recorded in the month of June – up from 58,000 in May and 48,000 in April – signalling a rebound in settlement volumes.
The report, which provides a comprehensive view of property sale settlement trends in Australia for the financial year ending June 2023, compared settlement trends over the past four years, focusing on the five mainland states of NSW, QLD, VIC, WA and SA.
PEXA’s Head of Research, Mike Gill, said while settlement figures in FY23 were lower than the previous year, there’s good reason to be optimistic for the year ahead.
“As the interest rate cycle approached its peak, we saw significantly fewer sale settlements recorded across the 2023 financial year, compared to FY21 and FY22 although they have still remained higher than levels experienced during the onset of the COVID pandemic,” Mr Gill said.
“Despite a soft start to the year, residential sale settlement volumes picked up from March across all mainland states, with June settlement volumes finishing the year strongly – at comparable settlement numbers to the prior boom year. This suggests the market has already bottomed out and is beginning to recover as we enter FY24.
“Despite higher interest rates and other headwinds, we are still seeing strong demand for housing in Australia with settlement volumes starting to bounce back. There are a number of factors that will continue driving the property market this year, including increased net migration, the trend toward smaller households, low volumes of new listings as sellers wait for the market to improve, and a very tight rental market,” he said.
PEXA’s research found $603 billion was spent on property in Australia in FY23, greater than the amount spent in FY21 and FY20 ($546.2 billion and $408.8 billion respectively), which reflects the increase in average selling prices over that period.
Over 665K sale settlements (both residential and commercial) were recorded nationally in FY23, 18.6% lower than FY22
Residential property highlights
- NSW, QLD and VIC all experienced double-digit declines in FY23 compared to FY22. QLD topped the nation for the second year running. Over 176,000 residential sale settlements completed in QLD in FY23, ahead of VIC with 164,883.
- Over $181.4B was spent on residential property in NSW during FY23 (23.9% lower than FY22). VIC recorded the second highest spend on residential property with $135.7B (down 19.8% year-on-year).
- Growth in settlement volumes varied across price bands between our three largest states in the June quarter. In NSW property sales across all price bands were up double digits, a similar trend was also observed in QLD, although higher priced properties ($2m+) led the recovery. In contrast to VIC where lower priced properties (sub $500k) saw the greatest uplift in settlement volumes in the June quarter (up 37.2%), largely driven by high development areas of Melbourne.
Commercial property highlights:
- Across our three largest states, the highest number of commercial sale settlements were recorded in VIC during FY23. VIC recorded 11,231 sale settlements ahead of QLD (10,161) and NSW (9,138).
- Commercial sale settlements declined in all three eastern states in FY23 with NSW experiencing the largest decline, down 21.0% year-on-year. The QLD market performed the strongest in FY23 only falling 9.0%.
- NSW continued to lead the country for aggregate value, which reflects the higher average transaction values for commercial property in Sydney. $30.8B was spent on commercial property in NSW during FY23 (down 22.3% from the peak year of FY22).