Home prices across Australia surged 20.3 per cent in the past year in the fastest growth in more than three decades, but the worsening affordability and looming lending restrictions are expected to slow the breakneck speed of growth in the months ahead.
There are already signs the upper end of the market is cooling off.
Sydney house prices have surged 28.9 per cent in the past 12 months to a median price of $1.311 million and are up 25.8 per cent since the start of the year, as home buyers such as Anna Burke scrambled to beat the stiff competition amid scant listings.
“We’ve been looking for a year and getting very frustrated watching the prices skyrocket over that time and becoming more depressed as we’ve been priced out every time,” she said.
Ms Burke and her partner decided to enlist the services of buyer’s agent Amanda Gould at HighSpec Property, who helped them snag a house in Sydney’s northern beaches.
“We’re extremely pleased we actually got in just before the second lockdown and before the lending restrictions would come into effect, because it would have been more difficult for us to find a house,” Ms Burke said.
“But the lending curb is also bad if we want to sell because we won’t have as big a market, because people can’t get enough money to afford it.
“I think it’s very difficult to get lending that is high enough to allow you to purchase anything in Sydney. Unless you have two good incomes, the banks are not lending enough for you to be able to get your foot in the door.”
The challenge of saving for a deposit
A 1.5 per cent increase in August in new mortgage commitments to investors – even as loans to owner occupiers declined – made the likelihood of lending curbs to a “frothy” investor market greater, JP Morgan economist Tom Kennedy said on Friday.
CoreLogic research director Tim Lawless said with housing values rising substantially faster than household incomes, saving a deposit has become more challenging for most cohorts in the market, especially first home buyers.
“Sydney is a prime example, where the median house value is now just over $1.3 million,” he said.
“In order to raise a 20 per cent deposit, the typical Sydney house buyer would need around $262,300.”
This would take someone putting away $2000 a month at a 3 per cent savings rate for nine years and six months to come up with the needed deposit.
The worsening affordability is already having an impact on the upper end of the housing market, which is now slowing down at the fastest rate.
Since peaking in the three months to May at 12 per cent, the growth rate in the premium segment of the market has slowed to nearly half at 6.3 per cent.
“We’re seeing the upper end of the market losing steam the fastest in the past three months,” Mr Lawless said.
“This is something we’ve seen in the past that the top end tends to lead the upswings and downturns as well, or at least the peaks and the troughs. So it does look like that’s starting to occur again.”
For now, the housing market remained buoyant. All capitals posted strong dwelling price growth during the past 12 months, with Hobart leading the charge at 26.8 per cent, followed by Canberra at 24.4 per cent and Darwin at 20.2 per cent.
Brisbane, Adelaide and Perth notched 19.9 per cent, 19.1 per cent and 18.1 per cent respectively. Melbourne rose by 15 per cent – the slowest of the pack.
Across the combined regionals, dwelling prices rose 23.1 per cent while the capitals notched 19.5 per cent.
During the month, Sydney dwelling prices rose by 1.9 per cent, Melbourne was up by 0.8 per cent, Brisbane by 1.8 per cent and Adelaide by 1.9 per cent.
Hobart outperformed with 2.3 per cent growth, followed by Canberra at 2 per cent.
Perth and Darwin lagged, with home prices rising by 0.3 per cent and 0.1 per cent respectively.
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/home-prices-soar-to-a-32-year-high-20210930-p58w4v