Australian property price growth is slowing, slowing… gone?

Posted: 10 November 2021 11:08 am
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2022 might actually see house prices flatten, but housing affordability has already fallen off a cliff.

According to new CoreLogic data, Australian property prices are growing at a slower and slower rate each month. The rate of growth peaked nationwide in March 2021, with prices rising 2.76%. In October, prices rose 1.49%.

Even at that slower rate, CoreLogic said that's still around a $10,000-a-month price increase on the Australian median-priced property.

This trend suggests that Australia's runaway property prices might actually be slowing down. This is something many experts predicted would happen in 2022.

Several factors make it likely prices will flatten or grow very slowly in 2022:

  • Interest rates. Low home loan interest rates have driven much of Australia's recent property price growth. When money is cheaper to borrow, home buyers can afford to borrow more of it. But interest rates can't really get any lower than they are. Given enough time, low rates essentially run out of steam and have less of an upward effect on prices. And lenders have actually started to raise some mortgage rates.
  • Too much growth. Prices have risen so fast that many people are finding it hard to enter the market. Housing affordability falls as prices rise and more investors enter the market, pushing out home buyers.
  • Restrained wage growth. Property prices have risen much faster than wages in Australia. Eventually, in theory, this should stop because people just can't make enough money to buy a house.

However, Australia is not really one property market, but many. Prices have actually fallen already in Perth, with WA's capital recording a minuscule -0.10% fall last month. Prices in Sydney grew 1.5% in October, in line with the national trend, while Melbourne saw a slower 1.00% growth.

It's a different story completely in Adelaide, where prices rose 2.0% last month and haven't really slowed yet. Brisbane recorded a 2.5% growth in prices, the strongest performing capital city last month.

And it is important to keep all this data in a wider context. As CoreLogic noted, "the decade average monthly movement in Australian home values is 0.4%, far lower than the current 'slowing' rates of increase."

Taking the long view, even these slower rates of growth represent large upward shifts in home values. Every month, property just gets less and less affordable for those who aren't already in the market.

A year ago, 66% of Australians thought it was a good time to buy property, according to Finder's Consumer Sentiment Tracker. Today, only 35% think so.

Check out a range of home loan rates from across the market and get all the latest property news and analysis from Finder.

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