Australia’s once red-hot housing market is offering a glimmer of hope for prospective homebuyers as it finally looks like it is cooling down.
Recent auction data from Ray White indicates a possible moderation in property prices after years of rapid growth.
The real estate giant's latest figures reveal that auction numbers are rising. With the number of active bidders falling, it is leading to lower clearance rates in many of the country’s major cities.
August saw a 15% rise in auction volumes compared to the same period last year, but fewer active bidders.
On average, 2.7 people participated in each auction. The figure was 2.9 last year. While this drop may not seem significant on a yearly basis, it has coincided with a marked slowdown in monthly price growth.
Property prices saw a notable deceleration as well. The prices grew by just 0.5% in August compared to 1.1% growth in August 2023.
Not everyone is experiencing the housing market slowdown in Australia. The cooling market is primarily driven by Sydney and Melbourne.
These two major areas have seen a decrease in active bidders and clearance rates. Sydney experienced a fall from 3 to 2.7 bidders on average.
Melbourne saw a sharper drop from 2.8 to 2.3 bidders. Clearance rates in both cities have also dropped, with Sydney falling from 70.9% to 65.7% and Melbourne dipping from 68% to 64.3%.
The situation is different In Brisbane and Perth. The two cities appear to be bucking the trend. The market reported an increase in average active bidders and improved clearance rates. Brisbane saw its bidder count rise from 3.3 to 3.7, and Perth’s numbers jumped from 3 to 3.6. Perth’s auction clearance rates surged by 50% from the same time last year, hitting a striking 85.7% in August 2024. This indicates a strong demand in the city’s housing market. Brisbane’s rates also saw a modest increase from 67.3% to 68.6%.
Analysts are cautioning people from reading too much into the ongoing situation as a sustained slowdown in the market. They believe property prices may continue to rise in the long term. A recent report by KPMG predicts that house prices could increase by 5.3% by the end of 2024. A further 5.6% rise is expected in 2025. High demand and limited supply remain the primary drivers behind ongoing price growth. Australia’s housing market proving surprisingly resilient despite the pressures of high interest rates, inflation, and low consumer confidence.
Labour shortages and rising costs for tradespeople are also slowing the rate of new home construction and contributing to the supply-demand imbalance. The ongoing demand for skilled labour continues to push up building costs despite a stabilisation in material and financing costs. This has created additional barriers for developers, slowing the completion of new homes despite an anticipated rise in housing approvals.
High rental costs are pushing more Australians to consider purchasing homes and boosting demand. Rents are not expected to come down, and it will continue creating more pressure on the housing market in the near future.
Auction results might suggest a cooling market in Sydney and Melbourne. However, experts warn that price growth is far from over. Prospective buyers may find some relief in the short term, but long-term affordability challenges persist as Australia’s housing market remains subject to high demand and constrained supply.