Property prices continue to climb as buyers see leverage return

According to the latest data released by CoreLogic, house prices continued to rise across that nation in every major city except Darwin (which saw a 0.4% decrease).

As we broadly predicted last week, Brisbane’s home values continued to surge, rising 2.9 per cent in November, the highest rate in the country.  However, putting Brisbane and South East Queensland aside for a moment,  the rate of property price increases is slowing down, but the market remains hot.

The Housing "Boom" is slowing

Put another way, we are still in a housing boom, but it feels like that boom could be coming to a slow end. Many of the major factors that contributed to the recent year of massive price increases are less relevant. For example,  cheap fixed loans have come to an end as the major banks raised rates in anticipation of similar moves by the Royal Bank of Australia. We also saw the financial regulator tighten lending rules around the serviceability of mortgages, requiring lenders to ensure mortgagees can demonstrate resilience against price increases. The end result of this is that you can borrow less against your earnings.

Property prices are still increasing, just not at the same rate. House prices in Sydney and Melbourne rose 1% last month despite listings increasing by 30% as restrictions eased. With the median price of a home in Sydney now 1.5 million, a 1.0% increase is $1500.

Why are house prices not slowing in Brisbane and Adelaide?

Trailing Brisbane, Adelaide saw an impressive 2.5% increase in property values in November 2021 alone. These capitals are more affordable, and therefore there are fewer affordability issues as the median house prices are still significantly less than Melbourne and Sydney. As people suffer from housing affordability pressures and increased loan costs, many will be forced to withdraw from the market altogether.  However, many determined buyers are looking interstate to Adelaide and Brisbane as ‘good deals’, further buoying and supporting these markets.

Finally some good news for buyers

Still, for buyers, there is some good news. Whilst prices are rising, they are not rising fast. Recent macroeconomic factors have taken some urgency out of the buying process. Increased listings and reduced clearance rates mean that buyers are finally starting to claw some leverage back. With more leverage, buyers can make better and more informed decisions. Compare and contrast this with multiple ‘unseen offers’ from the very recent heydays.

Whilst undertaking pest and building inspections was and is always essential, many buyers were finding defects that would 'in normal times' be worth a price reduction, but opted to not negotiate for fear of losing the deal. So, slowing house prices and increased listings have taken a lot of fear (and risky behaviour) out of the market.  This has returned some balance of power into the sales process. If things continue this way, you may find the frequency of real estate agents returning your call will begin to rise too! (Now that would progress.)

Written by Ben Saravia,  
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