Three reasons house prices will flatten after a period of skyrocketing growth By Catie McLeod

House prices across Australia continue to rise but there are signs the red-hot property market is cooling. Here’s why.
Three reasons house prices will flatten after a period of skyrocketing growth    By Catie McLeod
Australia’s property market appears to be slowly losing momentum after prices skyrocketed to astounding heights earlier this year. 

But it’s not necessarily good news, with analysts saying part of the reason for the slowdown is because house prices have become so unaffordable that more and more first homebuyers are being locked out of the market. 

In Sydney and Melbourne in October, the monthly rate of growth has more than halved since the highs seen in March, when they grew by a staggering 3.7 per cent and 2.4 per cent respectively, according to analysis by CoreLogic. 

Perth recorded its first negative monthly result since June last year, with values nudging -0.1 per cent lower. 

At the other end of the spectrum, Brisbane has taken over as the fastest growing market with housing values up 2.5 per cent in October. 

This was followed by Adelaide and Hobart where homes increased by 2 per cent in value over the month. 

Regional markets once again recorded a stronger trajectory than the capitals, with housing values up 1.9 per cent in October compared to a 1.4 per cent rise in capital city prices. 

House prices rose nationally by 1.49 per cent in October compared with 1.51 per cent in September, a drop from the peak rate of growth in March of 2.8 per cent, according to data from CoreLogic. 

So, while prices continue to rise, the rate of overall growth is slowing. And there are a few reasons why. 

CoreLogic research director Tim Lawless said slowing growth conditions are a factor of worsening housing affordability, rising supply levels, and less stimulus. 

“Combining these factors with the subtle tightening of credit assessments set for November 1, and it’s highly likely the housing market will continue to gradually lose momentum,” he said. 

Mr Lawless said new listings had surged Australia-wide by 47 per cent since the recent low in September but housing prices continued to outpace wages by a ratio of about 12:1. 

“This is one of the reasons why first home buyers are becoming a progressively smaller component of housing demand,” he said. 

“And housing focused stimulus such as HomeBuilder and stamp duty concessions have now expired.” 

The “Australian dream” of home ownership is becoming increasingly out of reach for many because of sky-high property prices. 

Even if prices are to stabilise in line with the latest data, Australia has already seen an enormous decrease in housing affordability. 

Everybody’s Home, an affordable housing lobby group, says Australia is the third least affordable housing market in the world where only 45 per cent of people aged under 35 own a home and one in three houses are investment properties. 

Earlier this year, a perfect storm of ultra-low interest rates, consumer confidence – sometimes referred to as “the fear of missing out” – and low supply drove prices in every Australian capital city to heights never seen before. 

The Reserve Bank of Australia governor Philip Lowe on Tuesday ruled out an increase in mortgage interest rates in 2021 but opened the door for a hike sooner than the timeline it had set of not before 2024. 

The central bank announced the cash rate would stay for now at the historic low of 0.1 per cent as widely expected. 

Property values have risen by an eye-watering 21.6 per cent over past 12 months, and regional Tasmania is leading the charge with a 29.1 per cent increase. 

In Sydney, the nation’s most expensive market, the median house price has now reached almost $1.5 million it’s become the norm to see dilapidated, crumbling homes fetch exorbitant prices despite being unliveable. 

Comparison website Finder last week crunched CoreLogic and Australian Bureau of Statistics numbers and estimated the average time to save for a deposit in the NSW capital at more than eight years. 

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