Australia’s surging property market may be set to cool as affordability pressures mount, borrowing costs rise and more stock enters the market, analysts say.
National home prices were at or near record levels at the end of October, while CBA analysis shows mortgage repayments as a share of income were currently the least affordable on record in all cities save for Brisbane and Perth.
Tim Lawless, CoreLogic’s executive research director, said the monthly gain in home values peaked in May at 1.5%. The year-to-date advance has been 7.2% and while the full-year increase may approach 10%, the market appeared to be losing momentum, with the pace of increases slowing even before this week’s Reserve Bank interest rate rise.
“We’re still expecting property prices to rise – just nowhere near as fast,” Lawless said.
Many commentators expected soaring interest rates would trigger a fall in real estate prices in 2023. However, the market turned out to be surprisingly strong in part because of a surge in population and the faltering supply of new housing.
A combination of falling affordability in most parts of Australia and a reduced ability to finance bigger purchases will also make significant price rises in 2024 unlikely.
Analysis by CBA, the nation’s biggest lender, shows mortgage repayments as a share of income were currently the least affordable on record in all cities save for Brisbane and Perth.
Sydney was the least affordable among major cities, with a median dwelling price at $1.090m, or 5.1 times the typical dual-income household of $215,000 a year. That was compared with 3.8 times in Melbourne, the second-least-affordable city, and a national average of 3.6 times.
“It is likely Sydney is approaching affordability constraints in terms of dwelling price growth,” said CBA economist