Mansions running hot but overall home market growth slowing

Top-end properties are continuing to pull jaw-dropping prices, but the broader property market’s amazing run may be drawing to an end.

7 Towers Road in Toorak in Melbourne.

The top end of the mansion market is running hot, even as the rate of price growth appears to be slowing across the broader residential market, as the frenzied first four months of the year draw to a close.

Another full weekend of auctions is expected, although slightly fewer homes are heading to market in Sydney and Melbourne, as a series of pricey sales in the Victorian capital show renewed depth in that market.

Research house CoreLogic is tracking 2,099 auctions, down on the 2,467 auctions held last week, and expects 933 homes in Melbourne to go under the hammer with Sydney to have 812 auctions.

Despite smaller cities having a long weekend with the ANZAC Day public holiday on Monday, which usually sees volumes drop, volumes are slated to be up in Adelaide and Brisbane.

At the very top end, the market has been buoyed by the return of overseas buyers, particularly from greater China, and those driven by concerns about the raging coronavirus pandemic in much of the world.

In one of the latest sales a Towers Road home in Toorak has sold for about $20m according to industry sources, leaving vendors the Spargo family among the beneficiaries of the property boom.

Selling agent, Kay & Burton’s Michael Gibson, declined to comment, but the exclusive street is one of the city’s most sought-after.

Businessman Peter Spargo, a former chair of the Melbourne football club, and his wife Kathleen, had picked up the five-bedroom home for $11.2m in 2008.

There has been a run of Toorak mansion sales, with experts putting the influx down to both finance professionals coming through the coronavirus crisis in a healthy position financially and the under-supply that has kept people out of the market for some years finally breaking.

In another recent sale this month former real estate franchise owner Gary Singer bought a restored 19th-century mansion in Toorak for about $22m. The seven-bedroom home, Trawalla, was on the market for just over a month.

But at the middle end of the market there could be some slowing in the rate of growth of prices after a rampant start to the year.

CoreLogic said the pace of capital gains across Australian housing markets had been close to record breaking, with the national growth rate in March the fastest since 1988.

The analyst put the exuberant conditions down to record low mortgage rates, a “stunning” surge in consumer confidence as the economic recovery beats expectations, stimulus measures which have driven home buying and building, and persistently low stock levels, “which has created a renewed sense of fear of missing out among buyers”.

CoreLogic said there were some early signs the exuberance in the housing market may be peaking.

“This isn’t to say housing values are about reverse; a more likely scenario is the housing market is moving through a peak rate of growth and the pace of capital gains will gradually taper over coming months,” the analyst said.

CoreLogic’s home value index is already indicating a slowdown in the pace of capital gain, which has been evident since late March.

AMP Capital chief economist Shane Oliver said that Australian home prices were in a cyclical upswing which likely has further to go into 2022.

“However, the longer-term bull market, that has seen above trend growth in property prices since the mid-1990s, may be close to an end as the long-term decline in interest rates bottoms out, property under-supply swings towards oversupply and the escape from the city phenomenon takes pressure off city property prices,” he said.

Mr Oliver said this may take some pressure off average capital city property price growth in the decade ahead.