• 24/07/2024

Housing demand cools but prices stay hot

Martin Kelly| Australian Financial Review| 14 May 2021

House market cools but prices stay hot (afr.com)

Big home price increases, fewer buyers and the removal of government purchase incentives are combining to slow the Australian property market, even though the number of active investors is up, REA Group says.

But home prices should keep rising, said Cameron Kusher, REA Group’s director of economic research.

Mr Kusher said low borrowing costs “remain a strong lure in this market” and would give buyers the confidence to pay higher prices.

There are signs the housing market is starting to cool, but that does not mean an end to high prices. 

“[An] increasing number of buyers have now purchased, and price increases mean that housing has become less affordable,” Mr Kusher said in the REA Insights Housing Market Indicators Report.

“We don’t expect the market to come to a grinding halt, prices are expected to keep rising, but we expect the second half of this year will not see the market quite as strong as it has been over the first half.Advertisement

“Sales volumes have eased back from highs, as have search volumes, and I would expect a further moderation in sales over the coming weeks.”

He said consumer property search traffic on its portal realestate.com had fallen 8.4 per cent from February highs, and email inquiries to agents fell for the third successive month during April.

Investor interest still hot

Bucking the downward trend was an increase in investor interest, which he believed would continue.

“Investor inquiry continues to grow and is 84 per cent higher than last year while first home buyers fade,” Mr Kusher said.

“With HomeBuilder having now ended it seems likely that first home buyer inquiry will continue to soften.

“Rental market conditions, attractive yields and capital-growth potential will likely lead to an ongoing uplift in inquiry coming from the investor segment of the market.”

Views per listing, another key metric, were also lower during April. NSW and Tasmania recorded the highest year-on-year increase in views per listing.

“We expect that views per listing will continue to ease with a heightened volume of new stock coming to market, sales volumes slowing somewhat and fewer overall buyers searching for properties,” Mr Kusher said.

In other trends, Mr Kusher said more buyers were continuing to search for higher-priced properties, but he wondered how long it would last.

“As affordability pressures rise with strong increases in prices it will be interesting to see how much further this trend runs, especially with a number of indicators having weakened from their recent peaks.”

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