Data shows house price boom likely to have peaked

Australia’s house price boom may have passed its peak, with the rate of growth remaining positive but slowing again in September as affordability issues and a lack of government incentives put the brakes on the entry level end of the market.

Capital city median dwelling prices rose 1.5 per cent in September, contributing to an annual growth rate of 20.3 per cent, the biggest year-on-year gain since June 1989, according to data from CoreLogic.

On a monthly level, however, September’s figure illustrated the market’s easing since a peak of 2.8 per cent growth was recorded in March.

CoreLogic research director Tim Lawless said the slowing growth was likely the result of higher barriers to entry for first home buyers, with the HomeBuilder stimulus initiative having closed to new applications in April.

“With housing values rising substantially faster than household incomes, raising a deposit has become more challenging for most cohorts of the market, especially first homebuyers,” Mr Lawless said.

“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 $263,000.

“Existing homeowners looking to upgrade, downsize or move home may be less impacted as they have had the benefit of equity that has accrued as housing values surged.”

Positive growth was again recorded across all capitals and regional markets in September, ranging from 2.3 per cent at the high end in Hobart, to 0.1 per cent in Darwin.

Canberra’s median dwelling price rose 2 per cent in September, Sydney and Adelaide’s both gained 1.9 per cent, Brisbane’s was up 1.8 per cent and Melbourne’s gained 0.8 per cent.

CoreLogic’s newly revised Perth index recorded 0.3 per cent growth.

Transaction volumes remained elevated in September, rending around 25.5 per cent higher than the five-year average and 41.9 per cent above the same time last year.

At the same time, listing levels remained “extremely low”, with the number of houses advertised for sale nationally 28.1 per cent below the five-year average.

Mr Lawless said those factors were skewing markets in favour of vendors.

“Nationally, homes are selling in 35 days, up from 29 days in April, and vendor discounting levels remain around record lows at 2.8 per cent,” he said.

“Another factor pointing to strong selling conditions is the bounce back in auction clearance rates as restrictions relating to one-on-one property inspections were eased mid-month across Melbourne and Canberra.

“By the end of September, the combined capitals clearance rate had returned to 80.5 per cent, its highest since late March.”

In rental markets, the pace of growth is also losing steam, Mr Lawless said, with rental growth also peaking in the March quarter at 3.2 per cent.

Since then, it has steadily declined to the 1.9 per cent recorded in September.

Rental yields remain compressed due to rental growth being outpaced by dwelling values, and sit at record lows across most regions.

Combined capital gross rental yields sat at 3 per cent in September, with Sydney and Melbourne the most compressed at 2.5 per cent and 2.8 per cent, respectively.

“Although yields are low, so too are investor mortgage rates,” Mr Lawless said.

“In July, the average three-year fixed rate for a new investor loan was 2.38 per cent, while variable rates were averaging 3.01 per cent.

“Considering the low mortgage rates, opportunities for positive cash-flow investment properties remain plentiful outside of Sydney and Melbourne.”