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Highlights
- Slower Price Growth Expected: ANZ predicts capital city housing prices to rise by 7.3% in 2024, slowing to 5.5% in 2025, signaling a cooling market.
- Regional Variations: Perth, Adelaide, and Brisbane are expected to see significant price increases, while Melbourne and Hobart may experience price declines.
- Affordability Challenges: Saving for a 20% deposit now takes 10.6 years on average, with cheaper properties gaining in value due to affordability constraints.
The Australian housing market is showing clear signs of cooling as analysts at Australia and New Zealand Banking Group (ASX:ANZ) observe key trends pointing toward a slowdown. According to ANZ economist Madeline Dunk, price growth has decelerated, auction clearance rates have decreased, and properties are staying on the market longer. These developments are indicative of a moderation in the national housing market's momentum.
Slowing Growth in Housing Prices
Despite ongoing price increases in some regions, ANZ expects overall capital city housing prices to rise by 7.3% in 2024, followed by a more modest growth rate of 5.5% in 2025. The forecast reflects a cooling off in the rapid price hikes that have characterized Australia’s property market over the past few years.
In Western Australia, Perth is expected to outperform the broader national market, with housing prices projected to rise by 25% by the end of the year. Similarly, Adelaide and Brisbane are forecast to see price growth of approximately 15%. However, Melbourne and Hobart appear to be facing headwinds, with anticipated price declines in these cities.
Rising Affordability Challenges
Affordability remains a critical issue in the housing market, particularly for first-time buyers. According to the ANZ-CoreLogic Affordability Report, saving for a 20% deposit now takes an average of 10.6 years. The report indicates that cheaper properties are gaining in price due to affordability constraints, as many buyers are increasingly focusing on lower-cost options.
Dunk highlighted that while the higher-end property market may experience slower growth or even declines, demand for more affordable housing has remained resilient. This trend suggests that the affordability pressures in major cities are shifting buyer interest toward the lower end of the market, where price growth has been more robust.
Regional Variations in Housing Market Performance
The national housing market’s cooling is not uniform, with different cities exhibiting varying price trends. While Perth, Adelaide, and Brisbane show strong price growth, Melbourne and Hobart are expected to underperform. The cooling trend in these markets may be attributed to factors such as slower population growth, housing oversupply, and more subdued economic activity in comparison to other capital cities.
These dynamics reflect a broader trend of divergence across Australian cities. As the national market cools, regional variations are likely to persist, with stronger performance in some areas balanced by more muted activity in others.
Bottomline:
Australia's housing market is entering a period of cooling, with capital city prices expected to slow over the coming years. Regional variations are evident, with Perth, Adelaide, and Brisbane outperforming, while Melbourne and Hobart may face further challenges. Affordability remains a key issue, as the time required to save for a home deposit continues to lengthen. As the market transitions, the focus on affordable properties is expected to strengthen, with cheaper housing options gaining popularity among buyers.
