Property prices are growing at the slowest rate since January – as one capital city starts going backwards

Property prices are growing at the slowest rate since January – as one capital city starts going backwards
(Brendon Thorne, Getty Images)
  • National prices rose 1.5% in August, according to CoreLogic, despite lockdowns in two of the country’s largest markets.
  • It marks the highest annual growth rate since 1989.
  • Commonwealth Bank economist Gareth Aird says the market is now “largely divorced” from the Australian economy.
  • Visit Business Insider Australia’s homepage for more stories.

There’s undeniable heat in the real estate market but growth rates are finally beginning to come back to earth as sky-high property prices squeeze buyers.

National values rose 1.5% in the month of August, according to CoreLogic data on Wednesday. While strong, it represents the small monthly gain since January as Darwin becomes the first capital city to fall off the pace and affordability constraints bite.

“Housing prices have risen almost 11 times faster than wages growth over the past year, creating a more significant barrier to entry for those who don’t yet own a home,” head of research Tim Lawless said.” Lockdowns are having a clear impact on consumer sentiment, however to date the restrictions have resulted in falling advertised listings and, to a lesser extent, fewer home sales, with less impact on price growth momentum.”

Yet despite all of those headwinds, the “ongoing shortage of properties” on the market is forcing buyers to continue paying more, according to Lawless.

Values in Sydney and Melbourne rose 1.8% and 1.2% apiece during their respective lockdowns.

Auction rates have trended down in the country’s largest two markets, but those that aren’t being withdrawn are still selling strongly, “albeit with a large proportion selling prior to the auction rather than under the hammer”.

Hobart led the pack nationally with 2.3% growth, while prices in Canberra, Brisbane, and Adelaide jumped 2.2%, 2% and 1.9% respectively. Darwin actually declined 0.1%, making it the first capital city to go backwards in months.

Western Australia was excluded from this month’s data set as CoreLogic investigates a ‘data divergence’.

With national prices having risen 18.4% in the last 12 months, the market has had its strongest annual growth since 1989, according to CoreLogic.

“[The current annual growth rate] is 3.6 times higher than the thirty-year average rate of annual growth,” Lawless said.

In a separate note, Commonwealth Bank economists reiterated their expectation annual growth finish the year at 20%, followed by 7% in 2022 as rock bottom mortgage rates keep the party going.

“We expect the housing market to be largely divorced from economic outcomes over the remained of [the second half of the year],” head of Australian economics Gareth Aird said. “Put another way, we expect home prices to keep rising over the remainder of the year despite the large negative shock the economy is going through.”

Eye-watering prices may not have deterred buyers entirely though they do appear to be affecting what they purchase.

Aird pointed out that year-to-date apartment prices have risen 9.3%, or roughly half the rate of houses, with the gap between median houses and units widening to $470,000.

Yet the divergent rates of growth have now narrowed, as affordability force more buyers to consider apartments.

Short of a lending intervention, it seems as if buyers will need to be priced out entirely to finally stop the runaway market in its tracks.