Capital city house price boom set to fade

Adelaide and Canberra (both 6-9 per cent) are expected to follow with sturdy gains, as is Darwin (5-8 per cent), while the Sydney and Melbourne markets (both 4-7 per cent) may now be priced beyond reach for many.   

Perth (3-6 per cent) will probably continue the slowdown it began last year after finishing as the only capital to record less than 10 per cent growth in 2021. 

The PropTrack report analyses consumer behaviour in real time by extracting insights from 12.6 million Australians who visit realestate.com.au each month.

Author Cameron Kusher says although property prices increased a staggering 23.8 per cent across the board over the past 12 months, monthly and quarterly growth started to slow over the second half of the year.

And it's a trend he expects to continue.

Brisbane and Hobart should see the biggest gains thanks to low supply, heightened demand and lower prices compared to Sydney and Melbourne, Mr Kusher says.

"On the other hand ... more expensive property prices in Sydney and Melbourne may increasingly see demand move out of those cities and into more affordable housing markets."

More generally, he says the removal of COVID restrictions means buyers may be less likely to dedicate as much of their income to housing, with some even deciding their current home is sufficient.

Also at play is the possibility cheap finance will be harder to come by and borrowers will no longer have the security of locking in ultra-low rates for several years.

"While changes by the Australian Prudential Regulation Authority around credit availability have been mild to date, they are tightening credit availability and reducing borrowing capacities," Mr Kusher said.

"In turn, this will likely contribute to a slowing of demand for housing and means that prices won't rise as rapidly as they have over the past year."

Meanwhile an uplift in new listings since lockdowns ended is likely to lead to a better balance between supply and demand.

This is expected to result in properties taking slightly longer to sell as potential buyers have more choice and less competition, meaning they don't have to move as quickly and may not have to pay a premium.

The PropTrack report found regional housing markets grew at 30 per cent over the past year compared to 21.7 per cent for capital cities.

The premium for houses compared to units is currently the widest on record.

And although there were 40 per cent more sales nationally in 2021 than 2020, more stock moving meant the number of total listings fell to historic lows.