Sign of cooling in home frenzy as price growth slows

The market remains bullish, but a slowing of price gains could be a sign sellers may lose some of their power, says CoreLogic.

Property price gains slowed by a full percentage point last month. Picture: John Gass

While the bullish property market is expected to deliver double-digit price growth nationally this year, a slow-down in capital gains over April could herald more sustainable gains over the coming months.

Housing price growth slowed by a full percentage point last month, increasing by 1.8 per cent, according to property researcher CoreLogic’s monthly index. The rise is significantly above the five-year monthly growth average of 0.3 per cent.

Sydney and Melbourne reported respective 2.4 per cent and 1.3 per cent gains over April. In smaller markets, Darwin was 2.7 per cent followed by Adelaide (up 2 per cent), Canberra (up 1.9 per cent), Brisbane (up 1.7 per cent), Hobart (up 1 per cent) and Perth (0.8 per cent)

CoreLogic executive of research Tim Lawless is not anticipating a drop in prices any time soon but he predicts capital gains to move higher at more sustainable, slower rates into 2022. “This is a fairly material slowdown in the monthly data,” he said, “but it is only one month, so we really need to see a few more months where things are slowing down to really call this a slowing trend.”

New property listings added to the market over the four weeks to April 25 were substantially higher relative to the previous two years and almost 14 per cent above the five-year average, but strong demand from buyers has kept the overall number of homes available low, with transaction numbers sitting 26 per cent above the five-year average.

AMP Capital chief economist Shane Oliver predicts affordability will be the biggest handbrake on gains, particularly among first-home buyers. Australian Bureau of Statistics data already suggests this is the case, with February figures revealing a 4 per cent fall in the number of first-time owners, ending year-long gains.

Mr Oliver expects average home prices to rise another 10 to 15 per cent to the end of 2022 before another cyclical downturn in 2023.

“This (would) mask a slowing from 15 per cent this year to 5 per cent next year,” he said.

Analysts at Citi predict house prices will peak in the third quarter of the year, with a “sharp moderation” in the growth to gains over 2022 to shrink to 1.5 per cent.