Is house price growth slowing after reaching a 17-year high?

To identify a time when property prices grew faster than they have recently, you'd have to go all the way back to the 2004 Athens Olympics. The golden run, though, appears to be slowing, according to the most recent data.

It’s no secret that home prices have soared to new all-time highs over the last 12 months.

According to CoreLogic’s newest Hedonic Home Value Index, home values have increased by 16.1 percent in the last 12 months, the fastest rate of growth since 2004.

To put that in perspective, property prices in some cities have outperformed some of Australia’s highest-paid professionals, such as doctors, anaesthetists, and CEOs, during the past year.

But there are signs that the growth rate is starting to taper.

Signs of a slow down

Australian housing values increased 1.6% in July, a result CoreLogic’s research director Tim Lawless describes as “strong, but losing steam”.

“The monthly growth rate has been trending lower since March this year when the national index rose 2.8%,” Mr Lawless explains.

And in a further sign of a property market slowdown, the value of new housing loan commitments fell 1.6% in June, the first fall in monthly lending figures this year, according to the latest Australian Bureau of Statistics data.

So what’s slowing things down?

Home is simply becoming out of reach for members of the community, as housing values rise faster in a month than earnings do in a year, Mr Lawless argues.

Furthermore, much of the federal government’s previous COVID-19-related fiscal assistance, such as JobKeeper and HomeBuilder, has now run out.

“It’s also likely that recent COVID breakouts and accompanying lockdowns have contributed to some of the loss of momentum,” says CoreLogic’s latest Hedonic Home Value Index study, “especially from a transactional standpoint in Sydney, which is undergoing an extended period of limitations.”

However, housing values are continuing to climb at a much greater rate than the national average.

According to CoreLogic, the average rate of monthly dwelling value appreciation over the last ten years has been just 0.4 percent.

So, what's next?

According to CoreLogic, the rate of growth will likely slow in the second half of 2021 as affordability limitations become more urgent and home supply steadily increases.

“Other possible headwinds are clear,” says the CoreLogic analysis, “including the likelihood of tighter credit restrictions.”

On the other hand, demand remains high, supported by historically low mortgage rates and the expectation that interest rates would remain low for a long time.

“An increase in the cash rate is unlikely for at least 18 months,” says CoreLogic.

“Australia’s economy is projected to fall further in the September quarter as a result of the recent spate of lockdowns, a factor that will likely keep rates on hold for a little longer.”

Please contact us.

With house prices rising at their quickest rate since 2004, it’s more vital than ever to buy your new home with a financing plan that works for you.

So, if you’re a motivated homebuyer interested in learning more about your alternatives, including your borrowing capability, contact us immediately. We’d be delighted to go through it with you.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au


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