Aussie home prices soar ahead of spring

Shock home price changes over the past month could signal a big reversal is coming in the housing market later this year.

Aussie home prices have been climbing faster ahead of spring, but there are also growing signs the market could soon turn as buyers hit affordability barriers and listings rise in multiple cities.

PropTrack’s latest Home Price Index, released Sunday, showed national prices grew by 0.22 per cent over August – more than twice the rate of increase over the previous month.

The rise occurred off the back of already substantial rises in prices across most cities over the past year, with the average Aussie home now about 6.2 per cent pricier than it was a year ago.

Median home values are at record highs in four of our eight capitals - despite higher interest rates restricting the amount buyers can borrow from the bank.

A crowd at a recent auction in Sydney, where stock levels have only recently begun to rise. Picture: Julian Andrews

PropTrack economist Eleanor Creagh said many of the forces pushing prices upward had been entrenched in the market for some time.

This included record population growth, sluggish building activity and soaring rents encouraging more tenants with means to become homebuyers.

These factors were combining with an increase in buying and selling activity usually seen this time of year, but Ms Creagh added that the situation could evolve as the country went deeper into spring.

“Listings have been rising in every (major) capital and, with the exception of Melbourne, that increase has been absorbed by an increasing number of buyers,” she said.

“If we see a slowdown in new buyers entering the market and listings continue to rise then you could see some markets shift to becoming more in buyers’ favour.”

Ms Creagh said such conditions were more likely to appear in Sydney and Melbourne over spring, while Perth, Adelaide and Brisbane were likely to remain strong seller’s markets.

Top growth markets in each capital

> Top performers in Sydney

> Top performers in Melbourne

> Adelaide top performers

> Brisbane top performers

> Perth top performers

A ‘fragmented’ market

Perth had the highest average rise in prices over August, cementing its status as the strongest market in the country, with monthly price growth of nearly 0.8 per cent.

Perth prices are now 23 per cent higher than they were at this time last year – a rise one economist described as “phenomenal”.

Perth has led the upwards charge in prices. .

Adelaide prices rose 0.45 per cent for the month and are now up 15.1 per cent annually, while the Brisbane increase was 0.35 per cent and 14 per cent, respectively.

Sydney home price rises were more modest by comparison, inching up 0.32 per cent for the month and 5.83 per cent over the year.

MORE: Experts warn: Don’t buy in these Aussie suburbs

Melbourne was the only major capital where prices went backward. They fell by an average of 0.18 per cent over August and are now 1.46 per cent cheaper than at this time last year.

Melbourne’s decline has meant the city has shifted from Australia’s second most expensive housing market before the pandemic to its fourth, with Adelaide set to overtake it in the coming months.

PropTrack senior economist Eleanor Creagh said conditions varied considerably across different capitals.

My Housing Market economist Andrew Wilson said Melbourne had been the most successful major city at supply new housing to accommodate its burgeoning population.

The city was also working through a “hangover” from the prolonged lockdowns during the pandemic, Mr Wilson said. “Melbourne has been underperforming for quite time,” he said.

Smaller capitals at risk of overheating

Mr Wilson said the extreme growth in Adelaide and, especially, Perth made these markets more at risk of becoming overheated at some point in the next year.

Heavy migration into southeast Queensland, coupled with housing shortages, meant this risk was less pronounced in Brisbane, he added.

Empty Melbourne streets during the 2021 lockdowns: recent home price falls could be a “hangover” from the pandemic. Picture: Getty Images

“Prices can’t keep rising forever,” he said. “The level of growth in our smaller capitals has been extraordinary. It’s quite amazing.

“Prices will catch up with incomes. Logic suggests growth will eventually flatten out once buyers begin to struggle to finance these big increases.

“We are also seeing early signs the business environment is turning so strong selling conditions won’t last forever.”

How much a ‘cheap’ home is in each city

An additional report from SuburbTrends indicated even house prices at the “most affordable” end of our capital city markets were beginning to get out of reach of many people’s budgets.

First-home buyers faced “immense” challenges trying to get into even the cheapest of markets, the report commissioned by MCG Quantity Surveyors said.

A home within the bottom quarter of the market for prices in Sydney was $829,000, which SuburbTrends analyst Kent Lardner said was an “eye-watering sum” that would be out of reach of many buyers.

In Melbourne and Brisbane the figure was about $600,000 and the typical price at the bottom of the Perth market was $500,000.

These prices all represented more than four times the annual income of a household earning $120,000 a year – despite being representative of the “cheapest” properties on offer.