The Australian Property Market: Will It Crash or Stabilize?

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In recent years, the Australian property market has experienced significant fluctuations. A surge during the Covid pandemic was followed by a slight downturn, but 2023 saw another rise in housing prices. However, according to the latest CoreLogic Home Value Index, while the national annual increase stood at 7.6% in July 2024, cities like Melbourne and Canberra showed more modest growth compared to Perth’s dramatic 24.7% increase.

Experts suggest the current property market dynamics vary significantly across different cities. “We’ve got a multi-speed market across our different capital cities, which is not unusual,” explains Domain economist Dr. Nicola Powell. The diversity in market behavior underlines the complex nature of property values in Australia, with certain areas seeing prices drop while others continue to rise.

Amid these trends, the Reserve Bank of Australia’s decision to maintain interest rates in August came as a disappointment to many, impacting the purchasing power of property buyers. The cash rate has steadily increased from 0.35% in May 2022 to 4.35% in November 2023, significantly affecting affordability. “Interest rates aren’t going to come down to the same sort of level as what we’ve seen pre-pandemic,” says Tim Lawless, director of research at CoreLogic.

The government has also stepped in, announcing a target of 1.2 million “new, well-located homes over the next five years” as part of its Housing Support Program. This initiative is expected to somewhat alleviate the pressure, but as Powell notes, the high median house price of $1.66 million in Sydney still poses challenges. “Listings are coming to the market, but they’re not being sold as quick,” she states, indicating a buildup of stock and a potential slowdown in market dynamics.

Despite these challenges, experts like Lawless do not anticipate a dramatic crash. Historical data suggests that even if the market slows, declines rarely exceed 15% from peak to trough before a new growth cycle begins. “A 10% to 15% drop in housing prices probably would be a good thing overall to restore some affordability,” he comments.

In conclusion, while the Australian property market faces various pressures, including rising interest rates and high prices, the outlook remains relatively stable with government interventions aimed at increasing housing supply. This could prevent a significant crash, instead leading to a gradual adjustment in the market dynamics.

*Quotes and data sourced from articles by Penny Pryor and insights from Dr. Nicola Powell and Tim Lawless.

References:

https://www.forbes.com/advisor/au/property/will-the-australian-property-market-crash/