Property prices surged more than 14% this year. There are signs the market is losing steam as buyers struggle to keep up.

Property prices surged more than 14% this year. There are signs the market is losing steam as buyers struggle to keep up.
Property prices in Australia continue to soar but buyers can't keep up. (Lisa Maree Williams, Getty Images)
  • Price growth nationally looks to be going through a slowdown as the runaway property market runs out of room to go much higher.
  • The latest data from CoreLogic shows prices rose 1.6% in the month of July, as the rate of growth starts to decline, especially in hot markets like Sydney.
  • Unable to shell out much more for a home, research director Tim Lawless said affordability constraints may see the market finally plateau.
  • Visit Business Insider Australia’s homepage for more stories.

Australian property prices looks to finally be losing steam as buyers begin to reach their absolute limit.

National prices rose another 1.6% in July, marking a 14.1% surge in 2021 alone and 16.1% over the last 12 months.

CoreLogic research director Tim Lawless said the market had experienced its “fastest pace of annual growth since February 2004″, but observed momentum was beginning to fade as Australians fell behind.

“With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community,” Lawless said. “Along with declining home affordability, much of the earlier COVID related fiscal support — particularly fiscal support related to housing — has expired.”

Yet it was Sydney which continues to lead the market higher, despite being both locked down for the entire month of July and ranking as Australia’s most expensive. The Harbour City jumped 2% in the last four weeks, adding almost $20,000 to the median property price.

Incredibly this represents ‘a slowdown’ in the capital city, which has consistently been the hottest in the country, growing by 3.7% in March.

While Lawless says worsening affordability is likely pulling the handbrake on price growth, he acknowledges that for now it still remains above most of the country.

In fact, it was only Canberra that grew faster, last month climbing 2.6%, and only Brisbane that managed to keep pace. Regional Australia, Adelaide, Hobart and Darwin all climbed 1.7%, while Melbourne etched out 1.3%.

Within most of those markets, it has been houses that are selling like hotcakes, as the pandemic places a new premium on space.

As affordability constraints kick in, there’s plenty driving the market higher still.

“Demand is being stocked by record low mortgage rates and the prospect that interest rates will remain low for an extended period of time.,” Lawless said.

“Sales are tracking approximately 40% above the five-year average while active listings remain about 26% below the five-year average. The mismatch between demand and advertised supply remains a key factor placing upwards pressure on housing prices.”

Lockdowns have previously been found to do little to balance the market either, with research showing that markets typically enter a lull under restrictions before rebounding strongly once they lift.

In part, it is driven by a sense of urgency and competition among buyers nervous at the prospect of being priced out once again.

It has led many of the big four banks to forecast a slower 2022, as price growth becomes unsustainable, and a lending intervention likely gets underway.

While it remains anyone’s guess, some suspect it might not even make it that far, as the market starts to run out of gas.

“With affordability constraints starting to impact purchasing capacity, it’s possible market activity could reduce through the second half of the year, helping to rebalance the market and take some heat out of the rate of house price growth,” Lawless said.