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Angie Raphael and Alex Druce April 28, 2022

There are signs Australia’s property boom is cooling down but prices are still rising in some capital cities. Here’s how your state is faring.

House and unit prices have hit quarterly record highs in some capital cities but new data shows Australia’s property boom is slowing, with the median house price growth rate dropping to 0.6 per cent this quarter.

According to Domain’s March 2022 Quarterly House Price Report, growth across the combined capital cities is 10 times slower than the three months to December 31.

Unit prices dropped by one per cent for the first time since June 2020, with a median price of $616,942, although combined capital median house prices are at a record high $1.07m.

Growth in regional Australia has outperformed the cities, with the median house price up by 3.1 per cent over the past quarter and 20.8 per cent annually.

The report comes as annual inflation accelerated to 5.1 per cent in the first three months of the year — the highest level in more than two decades.

Property prices were a major contributor to this figure with continuing strong demand for construction enabling builders to pass through increases in costs for both materials and labour.

The price of new dwelling purchase by owner occupiers rose 5.7 per cent over the quarter, the largest rise since the September 2000 quarter, following the introduction of the GST.

The inflationary figures forced many economists to bring forward their expectations of an interest rate hike with the Reserve Bank now widely expected to boost the cash rate from 0.1 per cent to 0.25 per cent when it meets on Tuesday.

However, Domain chief of research and economics Nicola Powell said their property data could signal a more accommodative purchasing period ahead for first home buyers, with annual growth at a 12-month low.

 

“While each city’s figures vary, we’re seeing Australia settle into a new normal, including increased interstate movements, ease of restrictions and return of international workers, which is prompting shifts in the property market,” she said.

“House price growth in Melbourne and Canberra is declining, while Sydney’s rate of growth is flatlining after an extreme property boom.

“When paired with increasing supply, these current dynamics will help ease competition between buyers.

“While we’re seeing cities such as Perth, Brisbane and Adelaide hitting new records with house prices, overall, the Australian property market is on the cool-down after incredible growth in recent years.”

Here is a breakdown of how each capital city is faring.

Sydney

House prices were up by 0.2 per cent, hitting $1.59m.

Unit prices fell 1.2 per cent to $796,524 which was the first quarterly decline since the June quarter in 2020.

Sydney house prices continue to outperform units, growing more than four times faster annually.

“Flattened house prices and declining unit prices has made Sydney’s price growth rate one of the most significant slowdowns of all the capital cities,” Dr Powell said.

“A year ago, house prices were rising 46 times the current pace, and at the same time unit prices were also increasing.

“This indicates that Sydney’s steepest upswing on record has ended and swinging power back towards buyers, creating better purchasing conditions by providing buyers time to contemplate rather than compromise, and ultimately allowing rational decisions to be made.”

Dr Powell said Sydney’s upswing was due to short supply and strong demand, but noted 2022 had seen the highest number of newly advertised homes for sale over a March quarter since 2014.

“Sellers have become motivated and are strategically timing a sale while prices are at or are close to a peak and prior to a tightening rate cycle that will impact borrowing capacity and the cost of a mortgage,” she said.

Melbourne

House prices recorded the first drop since the June quarter of 2020, with a decrease of 0.7 per cent.

Unit prices also dipped 2.2 per cent, which was the steepest negative moderation over a quarter since 2017.

House prices have grown more than seven times faster than units in the past year, with median house prices at 89 per cent above units.

“Melbourne’s property market is witnessing more homes being listed for sale than being purchased, continually showcasing greater purchasing power to buyers,” Dr Powell said.

“Buyer demand is softening in Melbourne, with the value of new owner-occupied home loans sitting 10 per cent below and first-home loans 29 per cent below the 2021 peak.”

Meanwhile, the value of investment loans hit a high this year, but Dr Powell noted demand would decrease as the prospects of interest rate hikes move closer.

Brisbane

Queensland’s capital has been the fastest-growing in Australia over the past year.

The median house price has increased by 32.1 per cent annually, while units have gone up 9.3 per cent annually.

“Brisbane has long been waiting for this property boom, showcasing the steepest upswing in 18 years for houses and 14 years for units,” Dr Powell said.

She noted the affordability of keeping up with rapid house price gains was a barrier for first home buyers.

“The property boom is likely to continue, with Queensland recording the strongest annual population growth of all the states driven by heightened interstate migration,” Dr Powell said.

“This interest will be supercharged by the opening of international borders, eased social distancing rules, and high vaccination rates.

“Also, the 2032 Olympic Games will underpin strong infrastructure, population, and economic growth over the next decade.”

Perth

House prices reached a record high of $622,030 — up by 1.5 per cent quarterly and five per cent annually for the first time since 2014.

But unit prices have fallen by 3.1 per cent over the last quarter and 4.6 per cent annually.

Perth remains the most affordable city to purchase a property.

“Perth’s buyer demand is soaring, with the volume of properties sold over the March quarter 15 per cent above the five-year average,” Dr Powell said.

“Easing of Western Australia’s border restriction in early March could accelerate another wave of new demand, freely allowing an easier relocation from overseas and interstate.

“This could create a population shift, with some residents opting to return home.

“This is a trend to watch as given the timing, these drivers are unlikely to have made an impact in the March quarter.”

Adelaide

South Australia’s capital hit new records, with house prices up by three per cent over the last quarter and unit prices increased by 1.3 per cent.

But the quarterly growth is about four times slower compared to the previous quarter, indicating affordability constraints.

“Adelaide has been a highly competitive market for buyers, as property choice has been problematic at a time of heightened demand,” Dr Powell said.

“While this remains the case, it is beginning to improve as the total supply of homes for sale is 16 per cent above the multi-year low.

“Rapidly rising house prices and the lure of a sellers’ market are enticing homeowners.

“As the supply-demand dynamics continue to rebalance, it should help to ease the fiercely competitive nature that has impacted buyers throughout this price upswing.”

Canberra

House prices declined by 0.9 per cent over the last quarter — the first drop since March 2020.

But Canberra remains the second most expensive capital city to purchase a house, behind Sydney.

Meanwhile, unit prices are up by 0.6 per cent.

“Confident sellers are listing their homes for sale while conditions remain strong and prices are close to a peak in Canberra,” Dr Powell said.

“This is helping to shift market conditions, with the total volume of homes for sale improving from the recent multi-year low.

“While supply remains tight — 30 per cent below the five-year March average — it is tracking higher following the first annual increase in just over two years.”

Hobart

House prices hit a record high, up by 4.3 per cent over the last quarter, but unit prices fell by 2.3 per cent.

Dr Powell said the quarterly price growth was losing momentum.

“Hobart’s hot property market is continuing as record-breaking house prices have been a persistent feature since mid-2020 but growth is starting to cool after it peaked in 2021,” she said.

“The quarterly growth has been strongest at the entry-price point, suggesting home hunters are trying to seek affordability.

“Unit prices fell over the quarter following three consecutive quarters of extreme price gains of around 10 per cent each.

“Despite the drop, this makes Hobart Australia’s third most expensive unit market behind Sydney and Melbourne.”

Darwin

House prices fell by 1.8 per cent, while unit prices dropped by 0.5 per cent.

“Weakening demand at a time of rising newly advertised homes for sale has resulted in a build-up of supply — 21 per cent higher in March compared to the same time last year,” Dr Powell said.

“This is creating more options for buyers and ensuring realistic seller price expectations.” 

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