Australia’s home price growth holds steady at elevated level

AUSTRALIAN home values rose in September – traditionally a strong month for sales – though the rate of growth remained steady amid increased supply and mounting affordability concerns.

Market bellwether Sydney advanced 0.2 per cent, taking its median price to a fresh high of A$1.2 million (S$1 million), property consultancy CoreLogic said on Tuesday (Oct 1). Perth led major cities with a 1.6 per cent gain, while Melbourne posted another decline as dwelling values in combined capitals rose 0.5 per cent in September.

Auction clearance rates eased to the low 60 range across major cities, about four percentage points below their decade average, CoreLogic data showed, while homes sold by private treaty remained on the market for longer.

“The slowdown in the pace of growth comes as homeowners increasingly look to sell,” said Tim Lawless, research director at CoreLogic. While the rise in real estate inventory is a seasonal trend, “the flow of freshly advertised housing stock has not been this high at this time of the year since 2021”.

Higher interest rates, a shortage of homes and booming population growth have caused a housing crisis in large parts of Australia. The problem is particularly acute in Sydney where buyers are being priced out of the market given an average home costs 13 times income. That has fuelled growth in the lower quartile of the market, with apartments outperforming houses, CoreLogic said.

Cities such as Brisbane and Perth posted strong monthly increases helped by robust state migration and reduced supply. Brisbane has now overtaken both Melbourne and Canberra to become the second-most expensive market after Sydney with a median price of A$881,091.

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The proportion of income required to service a new mortgage for the median income household was at a record high in the June quarter at 50.3 per cent. The dwelling value to income ratio, at 7.9, is only marginally below a record and it would take 10.6 years for a household on the median income to save a 20 per cent deposit to buy a median value dwelling, if they save 15 per cent of their income each year, according to CoreLogic

“While lower interest rates will help to improve serviceability, mortgage rates or housing values would need to come down significantly, or incomes rise substantially, before affordability metrics return close to average levels,” Lawless said. BLOOMBERG