Has the present record-breaking run in the property market come to an end?
Property prices soared at an incredible rate in early 2021, which was good news for homeowners but bad news for homebuyers. According to CoreLogic, there are seven important signals indicating the rate of capital gains has peaked.
It’s crucial to emphasize that CoreLogic isn’t implying that home prices are poised to plummet.
Not at all.
Instead, CoreLogic believes the housing market is “going past a peak rate of growth,” with capital gains “gradually tapering over the following months.”
“Overall, we expect house values to climb throughout 2021 and most certainly throughout 2022,” says CoreLogic’s Head of Research Tim Lawless, “although not at the unsustainable speed that has been seen in recent months.” The seven signs they’ve discovered are listed below.
1. The house value index from CoreLogic shows a downturn.
Sydney’s pace of growth has slowed from 3.5 percent (in the four weeks leading up to March 21) to 2.3 percent, according to CoreLogic’s rolling four-week change in housing prices (in the four weeks to 21 April).
Meanwhile, Melbourne’s unemployment rate fell from 2.5 to 1.5 percent, Brisbane’s from 2 to 1.8 percent, and Perth’s from 1.5 to 0.9 percent.
Adelaide, the only mainland state capital to have an increase, rose 1.7 percent from 1.2 percent.
2. The percentage of auctions that are cleared has decreased.
According to Mr Lawless, there has historically been a strong positive association between auction clearance rates and the rate of increase in housing values.
However, recent auction clearing statistics have shown a modest softening.
The weighted average clearance rate peaked at 83.1 percent in the final week of March before falling to 78.6 percent in the week ending April 18.
3. The number of vendors has expanded.
As sellers attempt to take advantage of the market’s excellent selling circumstances, there has been a significant increase in new listings.
According to CoreLogic, 26,470 capital city properties were added to the market in the four weeks leading up to April 18th.
Mr Lawless adds, “That’s the most new listings for this time of year since 2016 and 17 percent over the five-year average.”
4. Housing supply is increasing.
Housing construction activity has increased significantly as a result of HomeBuilder, which will add to total supply levels in the coming months.
According to CoreLogic, new house approvals are at all-time highs, while dwelling starts in the December quarter were nearly 20% higher than a year ago and 5.5 percent higher than the decade average.
5. The rate of population increase has slowed.
Due to the present rigorous border restrictions, entering Australia is substantially more difficult than usual.
Given a result, population growth has slowed, which may have an influence on housing demand (albeit it’s more likely to have an impact on rental markets, as most migrants rent before buying).
“Due to tightened borders and stalled overseas migration, population growth, which is an essential component of housing demand, has gone negative for the first time since 1916,” Mr Lawless adds.
6. There are fewer government incentives and initiatives to choose from.
You may have heard that the HomeBuilder award, which was originally worth $25,000 but was later reduced to $15,000, is now closed.
Furthermore, JobKeeper is no longer active, and JobSeeker has been turned off.
“Australia is entering a new phase of economic recovery with significantly less fiscal support, which could lead to a decrease in property market activity,” Mr Lawless argues.
7. For homebuyers wanting to break into the market, the barriers are getting higher.
Last but not least, as prices rise, the entry hurdle for property purchasers rises as well.
And the higher the barrier to entrance, the less active house searchers there are, which implies less demand to drive up prices.
“For individuals trying to enter the market, property value rise is significantly outpacing income growth, resulting in an increasing deposit hurdle for first-time buyers,” Mr Lawless continues.
Get in contact with us right away if you need assistance conquering these obstacles.
As you can see, there’s an argument to be made that the rate of increase in home prices has reached a saturation point.
However, Mr Lawless warns that a number of variables, including the RBA’s record-low official cash rate, are likely to sustain upward pressure on house values for some time, including the RBA’s statement that it won’t raise it “until 2024 at the earliest.”
While prices are projected to rise in the next years – and you may feel like you’re on the verge of buying a home – remember that there are options for savvy homebuyers.
For example, the federal government’s First Home Loan Deposit Scheme is due to accept another 10,000 applications in early July, allowing eligible first home buyers with only a 5% deposit to purchase a property without paying for lenders mortgage insurance (LMI).
For more information, give us a call – we’d love to help you out.
To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at email@example.com
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