Australian Property Market Median Home Value Hits New High, but Slower Growth Recorded in June
Table of Contents
The Australian property market continues to soar as the median home value reached a new high in June. However, the rate of price growth has slowed down to the lowest level in 18 months. Despite the slower growth, homes remain more expensive than ever before. This slowdown in price growth is good news for buyers who have been concerned about skyrocketing property prices that might lock them out of the market.
Slower Price Growth Eases Buyer Concerns
According to the latest PropTrack Home Price Index, home prices in Australia rose by 0.18% nationally in June. Over the past year, prices have increased by 6.55%. Although the growth rate is slower, it still represents a significant increase in property values. The surge in prices has been observed in many parts of the country, even as borrowing capacities have fallen by about 30% due to multiple interest rate rises since May 2022.
The strong demand for homebuying has kept prices elevated, particularly in areas where the supply of properties for sale has been limited. However, some cities are experiencing an increase in the number of homes hitting the market, which has contributed to the slowing growth in every capital city, as noted by PropTrack senior economist Eleanor Creagh.
Tax Cuts Boost Buying Power
Starting from July 1, buyers in Australia are expected to have more money to spend on property as the stage three tax cuts come into effect. These tax cuts will increase buyers’ borrowing capacities by tens of thousands of dollars. For example, a homebuyer earning $100,000 a year will receive a $2,179 tax cut, boosting their borrowing capacity by approximately $25,000. Similarly, a buyer earning $150,000 will save $3,729, allowing them to borrow about $37,000 more.
While these tax cuts will provide buyers with more purchasing power, it’s important to note that it may also lead to higher prices. According to Ms Creagh, the increase in borrowing capacity will likely support price growth as buyers’ budgets expand. However, she also mentioned that the slower pace of growth is expected to continue through the quieter winter period, especially amidst increasing uncertainty about interest rate outlook.
Economic Outlook and Regional Price Trends
Although economists at major lenders in Australia believe that the next move for interest rates will be downwards, the possibility of an interest rate hike at the Reserve Bank’s next board meeting in August has increased due to a higher than expected inflation result. In the previous month, the RBA decided to keep interest rates on hold but discussed the possibility of a rate hike without considering a rate cut.
In terms of regional price trends, Perth has witnessed the fastest growth in values among all the capitals, with the median house price rising by an incredible 23% in the past year alone. Adelaide’s median house price has also surpassed the $800,000 mark, increasing by approximately 15% over the past year. Brisbane’s market has been surging forward, with house prices up almost 14% and units up nearly 17% compared to a year ago.
On the other hand, Melbourne has experienced a decline in prices for the third consecutive month, with prices falling by 0.43% in June, putting prices at roughly the same level as a year ago. Hobart, Darwin, and Canberra also saw slight price decreases in June.
Slower Price Growth Predicted for the Future
Looking ahead, property values in Australia are expected to continue rising, albeit at a slower pace compared to the previous year. PropTrack’s latest Property Market Outlook Report forecasts a national price increase of between 2% and 5% over the 2024-25 financial year.
Perth is expected to witness the fastest price growth, with an estimated increase of 8% to 11%. Adelaide follows closely with price growth predicted to be between 5% and 8%. Sydney, Melbourne, and Brisbane are forecasted to experience price increases of 3% to 6%. Canberra, Hobart, and Darwin are expected to see slower price growth, ranging from 0% to 5%.
In conclusion, despite the slower growth in home prices, the Australian property market remains robust. The introduction of tax cuts is expected to provide buyers with more purchasing power, but it may also contribute to higher prices. The market outlook predicts continued price growth, albeit at a slower rate, with regional variations across different cities.
