Is Australia’s property boom showing signs of slowing down?
Property price growth across the country appears to be slowing down, to the relief of many buyers, but don’t count on a price crash just yet because the market still has a lot of momentum left.
A number of indicators are pointing to a slightly less frenzied market moving forward compared to what we saw in March, when price growth reached a 32-year high (up 2.8%) according to CoreLogic data.
Prices continued to rise in April, albeit at a slower pace than the month before with prices up by a smaller 1.8%.
Some have speculated that April’s easing of price growth was simply a blip that could be attributed to people going away over the Easter break, but there are a number of indicators that are pointing to price growth slowing down in the months ahead.
One of these is that more housing stock is coming onto the market, which may help absorb some of the high demand that the market has been experiencing of late.
A lot of people held back from selling their homes last year due to uncertainty over the pandemic, but as people regain confidence in the market we are seeing more vendors joining the fray, which is great news for buyers.
As we are seeing more vendors join the market however, we are seeing some buyers deciding to take a back seat. The unfortunate consequence of a rapidly moving market is that high prices and competition are making it a lot harder for buyers to break in.
Attractive government incentives, such as the lucrative HomeBuilder scheme, have also run out now which has resulted in reduced property demand.
Slower growth does not equal falling prices
While the market is showing signs that it may have reached its peak that certainly doesn’t mean that we’re going to start seeing prices go backwards.
Strong demand for property remains across the country and we are likely to continue to see prices go up, just at a slightly slower pace.
Things such as record low interest rates are still helping drive demand, as is strong consumer sentiment as the economy recovers from the pandemic.
With things such as international travel off the cards, a lot of people are also using their savings towards saving for a home deposit rather than going away on expensive holidays.
ANZ economists have predicted that property prices will soar by 17% this year, with growth to continue into 2022 too. They do however believe that if the current rate of growth doesn’t slow down then banking regulators will be forced to get involved to calm down the market.
