Australia’s two largest cities are showing signs of a property decline due to an unsustainable gap between borrowing capacity and home values, but in some other cities prices are still rising.
Australian property price growth is slowing, but not enough to solve serious housing affordability challenges.
Sydney and Melbourne are driving the decline, while Canberra and Hobart values are also falling, while price growth in other capital cities and regions in Australia continues – albeit at a slower pace, analysis from property data firm CoreLogic shows.
“Even in the highest growth markets such as Perth, Brisbane and Adelaide, we are seeing the pace of growth slowing,” CoreLogic head of research Eliza Owen told AAP.
Sydney and Melbourne have about 40 percent of the country’s housing stock, account for about half of the total value of homes nationwide and largely influence the change in value.
Seasonally adjusted for the generally slower December, national values rose slightly, but more homes have come onto the market and are taking longer to sell.
Growth has been slowing since June, but values have been steadily rising over the past 21 months, rising by almost 15 percent over the same period and are unlikely to fall anywhere near that amount, Ms. Owen to it.
‘The downturn in the housing market is usually shorter and less severe. This is unlikely to match the magnitude of the previous upturn.”
Sydney and Melbourne are driving the decline, while Canberra and Hobart values are also falling. The photo shows a house for sale in South Melbourne
Sydney and Melbourne have about 40 percent of the country’s housing stock. The photo shows a house for sale in Sydney
The cyclical downturn is unlikely to solve the problem of housing affordability across the country, especially for low-income households and renters.
As price increases slow, so do incomes and economic growth, and values are going beyond what many people can borrow unless they have significant savings or family help.
“Our housing market reflects more and more people not just buying down their income and savings, but relying on a higher income, a very large deposit and getting help from mum and dad’s bank,” Ms Owen said.
“But ultimately, even if that source of demand is tapped, something has to give, and it looks like that giving is finally happening.”
Prices will continue to rise as demand outstrips supply, and data from the Australian Bureau of Statistics showed on Tuesday that housing approvals fell, with fewer than 15,000 homes approved in November.
While the pace is expected to increase in 2025 and 2026, increased costs for builders – material costs, skyrocketing subcontractor prices and high interest rates – have led to a slew of business collapses that remain unaddressed.
CreditorWatch chief economist Ivan Colhoun said lower inflation and perceived slowing migration growth could lead to interest rate cuts, but not as much as some might hope.
“The emerging rebound in housing permits without any rate cuts is another reason to expect a rate easing cycle to be relatively limited,” he said.
Australia’s two largest cities are showing signs of a property downturn. There is a ‘Sold’ sign outside a house in Brunswick, Melbourne
However, things are different in other parts of the country, with house prices in affordable regional towns in Queensland expected to continue rising by double digits through 2025.
Property research director Simon Pressley predicts double-digit growth in just nine of Australia’s 25 largest cities this year, with a population of at least 100,000.
Cities where house prices are still affordable or close to the beach are expected to do particularly well, especially in northern Australia, despite being prone to flooding and cyclones.
Mr Pressley, a purchasing agent, is particularly bullish on Townsville, predicting a 25 to 30 per cent increase this year.
“The largest city in all of Northern Australia will win the premiership in the national property market by 2025,” he said.
South Townsville is particularly affordable, with an average house price of $539,771, following a 24 per cent increase in the past year, based on data from CoreLogic.
It’s still feasible for someone with a 20 percent mortgage down payment of $107,954 on an average salary of $83,000.
Mackay, also in north Queensland, is expected to see growth of 12 to 16 percent.
“Investors from all corners of the country are also attracted to the above-average rental yields of Mackay properties,” Mr Pressley said.
The average house price of $462,902 in South Mackay is still very affordable and attainable for someone earning $71,216, even after prices increased by 16.5 per cent in the past year.
Cairns in far north Queensland was expected to see growth of 7 to 11 percent, noting the tropical city was home to a naval base, healthcare and construction jobs, and was getting an $80 million airport upgrade .