4 reasons Australia’s real estate boom is about to slow

Australian house prices are still booming, but investors are bracing for a slowdown, according to CoreLogic.

Monthly data from the real estate group released this morning showed that domestic house prices posted another massive annual gain of 22.2% through November.

While these annual gains are expected in a zero interest rate environment, it is now generally accepted that the post-COVID house party could start to mellow.

Housing boom

Home prices will continue to climb next year, according to CoreLogic, but not as fast.

“November’s result was the weakest result since January, when values ​​rose 0.9%,” CoreLogic said.

And that’s part of a larger downtrend of weaker growth, as monthly house price growth peaked in March at 2.8%.

“Virtually all of the factors that have driven home values ​​up have lost their force in recent months,” said CoreLogic Research Director Tim Lawless.

He listed the following;

– A slow but steady rise in fixed mortgage rates by the main lenders;
– A rush of ads, which makes it more of a buyer’s market;
– The boom inevitably creating accessibility constraints, which are now emerging for new buyers; and
– The post-COVID surge in broader credit growth is starting to slow.

Performance divergence

Among the major real estate markets on Australia’s east coast, Sydney led the way with a record annual gain of 25.8% through November.

And while post-COVID demand patterns have resulted in disproportionate performance for regional areas as life plans shifted, CoreLogic said mid-sized capitals were the notable performers of November.

House prices in Brisbane rose at their fastest monthly pace since 2003 (+ 2.9%), while house prices in Adelaide jumped 2.5% – the city’s biggest gain in 28 years (1993).

Over the past 12 months, Hobart has led the pops with an annual gain of 27.7%.

At the same time, the continued strength in regional areas of Australia is still evident.

“The slowdown in housing market conditions is less evident in 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 is that single-detached homes have continued to outperform units at an all time high.

In Australian capitals, buying a home costs about $ 240,000 more than buying a unit. The difference is most marked in Sydney, where houses cost an average of $ 523,000 more.

“With such a large difference in value between major housing types, it is no wonder that demand is gradually shifting towards higher density housing options simply because they are significantly more affordable than buying from. a house, ”Lawless said.

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