The current property boom highlights a disparity amongst Australians

With the start of 2021 came an unprecedented growth in property prices, mortgages, and auctions. Several factors such as record low interest rates, decreased spending on recreation and holiday due to COVID, and government incentives spurred movement in the housing market, as Australians took the opportunity to invest in property.

In July, housing values in Australia increased by another 1.6%, bringing housing values to 14.1% higher over the first half of 2021, and 16.1% higher over the past year, as reported by CoreLogic. Australia’s property market has not seen this pace of annual growth since February 2004.

A combination of record low interest rates and active listings at approximately -26% below the five-year average in contrast to dwelling sales which have reached 40% above the five-year average has contributed to the property boom.

Increased housing values have allowed existing property owners to reap benefits, while despite lowering interest rates, prices soar out of reach for some looking to get in the market.

“With stock levels remaining tight, selling conditions have been skewed towards vendors. Auction clearance rates have remained in the low-to-mid 70% range across the major auction markets through July and private treaty sales continue to record rapid selling times and low discounting rates.” – Tim Lawless, CoreLogic

The imbalance of supply and demand is expected to continue placing upwards pressure on housing prices – however, the monthly growth rate has been trending lower since March, indicating a slowing interest.

This may be attributed to several reasons, as government incentives decrease and buying a property becomes increasingly unaffordable for many Australians.

“With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community.” – Tim Lawless, CoreLogic.

This has been most evident in the slowing pace of dwelling price appreciation across capital cities – Sydney’s monthly capital gain has fallen from 3.7% in March to 2.0% in July.

It is likely that we will see the rate of growth taper in the next six months as the lack of affordability becomes more pronounced and supply gradually increases.

References

Lawless, T. (2021) Growth cycle tapering as housing becomes less affordable. CoreLogic.

Wood, M. (2021) Australia's property boom sees prices grow more in July than incomes grew in a year. Australian Broker News.

CoreLogic. (2021) Hedonic Home Value Index - August. CoreLogic.

Wood, M. (2021) 5 things you need to know about Australia’s property boom. Australian Broker News.