4 reasons why Australia’s housing boom is set to hit the brakes
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Australian house prices are still booming but investors are preparing for a slowdown, CoreLogic says.
Monthly data from the property group out this morning showed national house prices posted another huge annual gain of 22.2% through the month of November.
While those annual gains have come to be expected in an environment of zero interest rates, it’s now generally accepted that the all-out post-COVID house party may be starting to sober up.
House prices will still climb into next year, CoreLogic says — just not as fast.
“The November result was the softest outcome since January when values rose 0.9%,” CoreLogic said.
And it’s part of a broader downtrend of softer growth, since monthly house price growth peaked in March at 2.8%.
“Virtually every factor that has driven housing values higher has lost some potency over recent months,” CoreLogic’s research director Tim Lawless said.
He listed out the following;
– A slow but steady rise in fixed mortgage rates by the major lenders;
– A rush of listings, which makes it more of a buyer’s market;
– The boom inevitably creating affordability constraints, which are now emerging for new buyers; and
– The post-COVID surge in broader credit growth is starting to slow.
Among Australia’s major east coast housing markets, Sydney led the way with a bumper annual gain of 25.8% through November.
And while post-COVID demand patterns gave rise to outsized performance for regional areas as living plans changed, CoreLogic said mid-size capital cities were the notable November performers.
House prices in Brisbane rose at their fastest monthly pace since 2003 (+2.9%), while Adelaide house prices jumped 2.5% — that city’s biggest gain in 28 years (1993).
Over the past 12 months, Hobart topped the pops with an annual gain of 27.7%.
At the same time, ongoing strength in Australia’s regional areas is still evident.
“The slowdown in housing market conditions is less obvious across the regional areas of Australia, where the monthly pace of capital gains has accelerated over the past three months,” CoreLogic said.
Another notable trend in the latest data was that free-standing houses continued to outperform units by a record rate.
Across Australian capital cities, buying a house is around $240,000 more expensive than buying a unit. The difference is starkest in Sydney, where houses cost $523,000 more on average.
“With such a large value gap between the broad housing types, it’s no wonder we are seeing demand gradually transition towards higher density housing options simply because they are substantially more affordable than buying a house,” Lawless said.