In June, Australia’s median home values reached new peaks, marking a steady but slower growth rate compared to previous months. According to the latest PropTrack Home Price Index, national home prices rose modestly by 0.18% during the month and have increased by 6.55% over the past year.
Despite these record highs, the decelerated pace of price growth comes as a relief to buyers concerned about affordability amidst soaring property prices. This moderation in growth has been attributed to a combination of factors, including reduced borrowing capacities due to multiple interest rate hikes since May 2022.
Eleanor Creagh, senior economist at PropTrack, noted that the housing market across all capital cities has begun to show signs of slowing down. The increased availability of homes for sale in some areas has provided buyers with more options, thereby easing the upward pressure on prices.
The implementation of stage three tax cuts, effective July 1, is expected to inject more buying power into the market. For instance, a homebuyer earning $100,000 annually will receive a tax cut of $2,179, potentially boosting their borrowing capacity by approximately $25,000. Similarly, higher-income earners could see their borrowing capacities increase by up to $37,000, stimulating further price growth.
However, despite these increases in purchasing power, Creagh cautioned that higher budgets could perpetuate price inflation, particularly as buyers adjust to the improved financial landscape.
Looking ahead, while home prices are anticipated to continue rising, Creagh forecasts a slower pace during the quieter winter season, particularly amid uncertainties surrounding future interest rate adjustments. Economists at major Australian banks lean towards predicting a future rate cut by the Reserve Bank, although recent higher-than-expected inflation figures have raised the possibility of an imminent rate hike.
In terms of regional variations, Perth has seen the most rapid price growth, with median house prices surging by 23% over the past year to reach a record $762,000. Adelaide followed suit, breaking the $800,000 mark with a 15% increase in median house prices to $810,000. Brisbane also experienced robust growth, with house prices rising by nearly 14% and units by almost 17% year-on-year.
Despite Sydney and Melbourne maintaining their positions as Australia’s most expensive cities, both markets have shown signs of stabilizing. Increased listing activity in these cities has improved buyer choice, although Sydney recorded its slowest growth rate of the year at 0.41% in June.
Overall, while the Australian housing market remains buoyant, recent trends suggest a tempered growth trajectory amidst changing economic conditions and policy developments affecting buyer sentiment and market dynamics.
