STATE OF THE STATES – CAPITAL CITIES
After experiencing the strongest period of price growth ever recorded , the Australian market is now starting to slow . Year on year , capital city house prices are still up 6.4 per cent , however they ’ ve declined by 3.5 per cent since the start of the year .
While the market is cooling , for now there are no signs of a price crash . The biggest declines for now are in Melbourne and Sydney . In Adelaide , prices are still increasing .
Why are prices not falling rapidly despite sharp increases in interest rates ? Part of it is likely momentum in the market . Price growth doesn ’ t generally stop as soon as sentiment shifts and this is likely a driver of growth in some cities for now . little evidence of investors trying to get out and lending to investors remaining high , despite the cost of financing increasing . While capital growth has stalled , rental rates are increasing which may balance out returns for many investors . Alternative investments to property are also being negatively impacted by high inflation and rising rates .
The fourth driver is simple supply and demand . Population growth is starting up again at the same time that new development is stalling as a result of problems in the construction industry . While this has a more creeping impact on pricing , it ’ s set to become problematic over the next 12 months and is already showing up in rental growth .
The second is debt levels . Sydney home owners , the most indebted in Australia , are far more sensitive to interest rates compared to a market like Adelaide where housing is far more affordable . The median for Adelaide is up over 10 per cent since the start of the year , moving in the opposite direction to Sydney .
The third is the inflation-proof nature of property and how this is impacting investor behaviour . Right now , we ’ re seeing very
While the market takes a breather it ’ s important to reflect on historical trends in house price growth . House prices don ’ t zig zag in a regular fashion , pulling forward and backwards in equal measure , but rather operate in a more stepped pattern with strong surges in growth , followed by periods of either smaller declines in pricing or stability . This greater stability we ’ re seeing now is in many ways an easier market to transact in , whether you ’ re a buyer or a seller .
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