Australian house price increases have been slowing in recent months as the impact of the pandemic begins to be felt in Australian property markets. This has been led by Sydney and Melbourne which are Australia’s largest cities and have the most expensive property prices in the country. Analysts also suggest the slowdown is due to tighter lending criteria, with banks tightening approvals for interest-only loans, and the result of record levels of home construction (over 200,000 per year).
This trend looks to continue as a result of much tighter lending standards being imposed by Australia’s banking regulator, banks becoming more risk-averse in offering mortgages, affordability becoming an issue and a large increase in the number of apartments available on the market.
Given the inflation rate forecast, modest price declines are expected in most capital cities over the next year or so. Subsequently, all Australia’s capital cities are expected to show price some growth over 3 year term, but the results are likely to be fragmented depending on the market in question.
Australian housing markets are not expected to crash, contrary to what some doomsayers have predicted, because they are underpinned by record low interest rates, and a relatively stable, although subdued, economic environment and the prospect of strong population growth once restrictions on immigration are lifted.
While population growth is likely to absorb the oversupply of new dwellings built during the recent construction boom, any growth in rental demands will be minimal, according to analysts.
The downturn in Sydney prices is expected to continue in the short term with predictions of house prices falling by 2 per cent over the next financial year, before rebounding during the following years. Sydney house prices are expected to rise about 3 per cent in 2021, which is the lowest rate of every Australian capital city.
House prices in the Victorian capital Melbourne have surged 65 per cent over the last five years reaching have now reached their peak. Even though the Australian property market is taking a breather after this exceptional growth, there is no sign of a collapse in sight and prices are expected to grow for the foreseeable future..
It is expected that population growth will continue to fuel demand for housing, maintaining an overall undersupply in the market, when the vaccine for the pandemic becomes more widely available and Australia returns to its high skilled immigration intakes of the past decade.
