The Australian property market feels like 2017 again, when sales were peaking and an intervention was imminent

The Australian property market feels like 2017 again, when sales were peaking and an intervention was imminent
(Peter Rae, SMH)
  • The latest CoreLogic data shows Australia’s property market is firing on all cylinders, mirroring the last price peak seen four years ago.
  • Back then the heat in the market was enough to force regulator APRA to make a move, restricting the flow of credit into the market and putting an end to soaring prices.
  • This time around, regulators are expected to make similar moves if the market doesn’t slow down of its own accord, as lending growth runs away and prices break record highs.
  • Visit Business Insider Australia’s homepage for more stories.

Property prices continue to break record highs but the market is experiencing a real sense of deja vu.

Some 31,605 homes were taken to auction across the months of April, May and June –12,600 more than the previous quarter.

It marks the busiest period of auctions since the final three months of 2017 when just 800 more homes were on the market, according to CoreLogic data.

The results reflect a clear appetite in the market, with three in four homes in Australia’s combined capitals selling, and property values rising by more than 6% in just three months.

Considering record low interest rates, easy monetary policy and generous government stimulus, it is little wonder there’s so much heat in the market.

But the parallel to 2017 is interesting for another reason, because it came just before regulator APRA led a lending crackdown and prices started a ‘gentle landing’.

Regardless of whether prices are due for a haircut, it appears that a similar dynamic is playing out in today’s market.

“Despite the strong result, there has been an easing in the clearance rate from the March quarter, when 80.0% of properties sold,” CoreLogic head of Australian research Eliza Owen said. “This reflects a broader loss of momentum in the Australian housing market, as affordability constraints set in, and March looks to be a peak period of growth for the current cycle.”

As last happened in 2017, a property intervention also looks imminent, as home buyers in some cities secure finance at a rate almost double the decade average. Investor loans are back where they were in 2017, despite the fact that it is home buyers who are still very much driving this current market.

APRA, the Reserve Bank of Australia (RBA) and ASIC are all watching the current lending boom carefully and are becoming increasingly concerned the growth in mortgages is unsustainable.

Economists and property experts alike expect the triumvirate to step into the market in the next few months, slowly tightening the finance tap, via five possible restrictions.

As lenders approve fewer borrowers, and buyers find their buying capacity reduce, the most likely consequence is that price growth begins to level off, curtailing a multi-year boom.

Listings fall

At the same time, the market is working through its own set of unique circumstances in 2021.

Greater Sydney’s COVID-19 case numbers continue to climb, with the city’s lockdown unlikely to end on Friday. It’s impact looks set to dampen buying activity over the next quarter, with less than 600 auctions taking place over the weekend, or 150 fewer than the one previous. One in five Sydney homes were withdrawn prior.

Of those properties managing to go under the hammer, around 70% are finding a final buyer. However, clearance rates and sales volumes are expected to take a hit as the lockdown drags on, preventing live auctions and inspections, and hurting broader confidence.

Similar withdrawn figures were seen in Melbourne, albeit on the hope the state may escape stay-at-home orders this week.

Elsewhere, most other markets continue to fire. Nearly nine in ten Canberra homes are selling at auction, while clearance rates remain north of 70% for Melbourne, Adelaide, and Tasmania while Brisbane’s just fell short.

The results in each city will help keep up pressure on regulators to act again.