Earlier this year, property prices across the country climbed at an incredible rate. With many houses going for way above asking price. While this steady increase has reduced housing affordability for many, CoreLogic says that these record-breaking increase rates have peaked.
Now, this isn’t to say that the housing market prices will begin to reduce in the coming months. CoreLogic actually believes that values will continue to increase over 2021 and even into 2022. However, the rate of this increase is believed to taper out over the coming months and not be as intense as we have been recently experiencing.
The recent growth has been unsustainable to Melbourne’s market, so it’s believed tapering of pace is welcomed by house hunters all over.
There are multiple reasons behind assumed plateau in rate of price growth. Including Home value index, a drop in auction clearance rates, increased activity of vendors, increase in housing supply, fewer government incentives and more obstacles for buyers to overcome.
Corelogic’s home value index has indicated a slowdown. Their rolling four week change in dwelling values shows Melbourne’s rate of growth has dropped from 2.5% (in the four weeks leading up to March 21st) to 1.5% (in the four weeks to 21st of April).
Additionally, auction clearance rates are suggesting a change in the rate of property value increase. There has always been a strong relationship between the auction clearance rates and the pace of appreciation in housing values. And the slight reduction in auction clearance rates speaks to a potential decrease in appreciation rates.
Vendor activity has also increased with a considerable rise in new listing as more and more people are looking to take advantage of the market’s currently strong selling conditions. We are currently seeing “the largest number of new listings for this time of year since 2016” according to Mr. Lawless from CoreLogic.
Thanks to the HomeBuilder there has been a significant lift in housing construction that will ultimately add to the available property and decreasing the rate of value increase. Approvals for new dwelling construction are at record highs, points out CoreLogic, and dwelling commencements over the December quarter were almost 20% higher than a year earlier and 5.5% above the decade average.
The decrease in government incentives will also decrease the strength of rate of property values rising. Jobkeeper and the HomeBuilder programs have closed while Jobseeker has been dialled back significantly. This should have an influence of housing affordability and the prices that people are willing to pay for property.
The recent increase in housing prices is also significantly pricing out many home buyers. “For those looking to enter the market, growth in housing values is substantially outpacing incomes, which means a growing deposit hurdle for first home buyers,” explains Mr Lawless. The rates of increase of property values will not continue to climb as less and less buyers are able to stay competitive.
While the previous reasons suggest that housing prices won’t be decreasing any time soon, the rate of their increase should be declining. Therefore, if the increase has been a concern for you as a buyer, now is a great time to start revisiting your options. Talk to us today for further assistance in your financing position.