The THREE signs the massive surge in Australian house prices is coming to an end
- Real estate data group CoreLogic said growth in house prices had peaked
- Research director Tim Lawless said more homes were going on the market
- Auction clearance rates are also moderating as more dwelling approvals surge
- The combination is set to slow down the pace of stellar property price growth
Australia’s record-breaking surge is house prices is tipped to slow, with three key warning signs showing a supply glut could end the boom.
Auction clearance rate have fallen, listing rates have risen as home owners hoped to cash in and building approvals have surged as immigration is turned off.
National property prices in March soared by 2.8 per cent, the fastest pace since October 1988, and Sydney’s median house climbed by an even more dramatic 4.3 per cent in one month to a stratospheric $1.112million.
CoreLogic research director Tim Lawless said the property price growth had most likely peaked, pointing to an increase in market listings for houses and apartments.
Australia’s record-breaking surge is house prices is tipped to slow down as more people try to cash in on the boom. Pictured is an auction in the Sydney suburb of Paddington
‘There are some early signs the exuberance in the housing market may be peaking,’ he said.
‘This isn’t to say housing values are about reverse; a more likely scenario is the housing market is moving through a peak rate of growth and the pace of capital gains will gradually taper over coming months.’
Listings of new homes on the market are 17 per cent above the five-year average, creating a risk of over-supply which puts a downward pressure on values.
The over-supply is exacerbated by the continuation of border closures, which strips new migrants out of the buying market.
A clampdown on Indian arrivals, and the likelihood the borders will remain closed for much longer than expected due to the slow pace of vaccine rollout, mean the return of migrants to the buyers market is some time off yet.
National auction clearance rates have also slowed from very high levels, dropping to 78.5 per cent on April 25, down from 83.1 per cent during the final week of March.
CoreLogic research director Tim Lawless said the pace of property price growth had most likely peaked, pointing to an increase in market listings for houses and apartments. Pictured is a Canberra house on the market
House prices rise everywhere
Sydney: up 4.3 per cent to $1,112,671
Melbourne: up 2.6 per cent to $859,097
Brisbane: up 2.6 per cent to $607,969
Adelaide: up 1.6 per cent to $518,692
Perth: up 1.8 per cent to $527,833
Hobart: up 3 per cent to $584,974
Darwin: up 1.9 per cent to $519,575
Canberra: up 3.3 per cent to $819,707
Source: CoreLogic Home Value Index for March 2021 on median house prices
Also, building construction approvals in February were at a record high since the Australian Bureau of Statistics began compiling the monthly data in 1983.
In just one month, the number of new dwellings approved surged by 21.6 per cent, adding to the supply glut.
Approvals for new detached houses between December and February were 50.7 per cent higher than the same period in late 2019 and early 2020 just before the pandemic.
Development approvals surged as home owners sought to take advantage of the federal government’s existing HomeBuilder scheme that was due to run out in April 2021.
The program has since been extended until April 2023, further boosting the supply of new homes.
This will give owner-occupiers $15,000 subsidies if they spend at least $150,000 on a home renovation.
Dwelling commencements over the December quarter were almost 20 per cent higher than a year earlier and 5.5 per cent above the decade average.
Despite the warning signs, many experts are forecasting a continuation of price increases through 2022.
Westpac last week updated its forecasts to have Sydney and Melbourne property prices grow by 5 per cent in 2022.
As recently as February, chief economist Bill Evans was forecasting 10 per cent capital growth next year in Australia’s biggest cities.
He is expecting the Australian Prudential Regulation Authority, the banking regulator, to impose stricter rules on investor lending.
The supply of Australian homes is also likely to eventually increase as immigration is turned off the prevent the spread of Covid. Pictured is a house under construction in Melbourne