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Home prices rising at fastest pace in 32 years as lending curbs on the horizon

Image of Sydney skyline, SOLD real estate sign
Australia's house prices continued to climb through September 2021. (Source: Getty)

Australian property prices rose by 1.5 per cent over September, with the increase also marking the fastest annual pace since June 1989, new CoreLogic figures have revealed.

In 2021 alone, dwelling values have risen by 17.6 per cent. Compared to 12 months ago, prices are 20.3 per cent higher.

The new data comes as the Reserve Bank, bank chiefs and Treasury alike become increasingly concerned about the red-hot property market, which has sparked concerns about inequality and housing unaffordability.

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House prices in Hobart led the charge, growing 2.3 per cent in September, followed by Canberra (2 per cent) and Sydney and Adelaide respectively (1.9 per cent).

Meanwhile, property values in Darwin (0.1 per cent) and Perth (0.3 per cent) barely budged.

CoreLogic Hedonic Home Value Index for the month of September 2021. (Source: CoreLogic)
CoreLogic Hedonic Home Value Index for the month of September 2021. (Source: CoreLogic)

Demand for homes in regional areas also pushed prices up, led by regional NSW (2 per cent) and Regional Tasmania and Queensland alike (1.7 per cent respectively).

Pace of growth is gradually easing

While September's growth delivered the property market's highest annual growth in 32 years, tracking values by a monthly basis shows the pace of growth is slowing.

CoreLogic research director Tim Lawless said the skyrocketing prices have made raising a deposit a challenge for those wanting to get a foot on the property market.

“Sydney is a prime example where the median house value is now just over $1.3 million. In order to raise a 20 per cent deposit, the typical Sydney house buyer would need around $262,300,” he said.

Lending data suggests that “more first home buyers are choosing to ‘rentvest’ as a way of getting their foot in the door”, he added.

For renters, the news is not much better; rent prices are also continuing to rise, though like house values, the pace is losing steam.

“Throughout the September quarter, we are now seeing unit rents rising at the same speed as house rents across Sydney (2.3 per cent) and unit rents are rising faster than houses in Melbourne (1.3 per cent for units and 1.1 per cent for houses),” said Lawless.

“This is a significant change in rental market trends, where previously the unit precincts, especially inner-city high-rise areas of Melbourne and Sydney, were acting as a drag on rental growth.”

20 February 2021: COVID-19 has done nothing to dampen Australians' enthusiasm for property. (Photographer: Brent Lewin/Bloomberg)
20 February 2021: COVID-19 has done nothing to dampen Australians' enthusiasm for property. (Photographer: Brent Lewin/Bloomberg) (Bloomberg via Getty Images)

What’s next?

A number of factors are leading to expectations that house prices will decline eventually.

Treasurer Josh Frydenberg flagged a crackdown on risky lending earlier this week, in a bid to control household debt and curb the number of loans which are too high relative to the borrowers’ income.

Meanwhile, the imminent easing of lockdown restrictions will see consumption and spending patterns return to normal, which should ease housing demand, according to CoreLogic.

Also, it’s likely that more houses will be listed on the market, increasing supply.

“The spring selling season has been delayed to some extent by lockdowns in Sydney, Melbourne and Canberra, however the recent trend has shifted towards a rising number of new listings,” the property firm said in a statement.

“This could take further heat out of the market as buyers benefit from more choice and less urgency.”

But it’s still very much a seller’s market, it said.

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