Australia’s housing market is experiencing a slowdown, with prices in major cities like Sydney and Melbourne declining, reflecting growing affordability concerns and weaker buyer demand. This shift comes as interest rates remain elevated and housing affordability continues to be a challenge for many Australians.
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Major Cities Witness Slowest Growth in Nearly Two Years
According to CoreLogic Inc., a property consultancy, Sydney home prices fell 0.2% in November, marking the second consecutive monthly decline. Melbourne also saw a dip, continuing a trend of price decreases observed in 10 of the past 12 months. Overall, major city home prices edged up just 0.1% in November, the slowest pace of growth recorded since February 2023.
“The downturn is gaining momentum in Melbourne and Sydney,” said Tim Lawless, research director at CoreLogic. He also noted a similar cooling trend in mid-sized capital cities, which have recently been driving growth in the housing market.
Sales Volume Declines, Reflecting Weakening Demand
CoreLogic’s data reveals a decline in home sales volume, estimated to be 4.6% lower over the past three months compared to the same period last year. Sydney experienced the most significant drop, with sales estimated to be 15.4% lower year-on-year. This reduced sales activity points to a weakening demand side of the market.
“With increased supply and decreased purchasing activity, selling conditions have worsened throughout the spring,” CoreLogic stated. The report further suggests that the housing market is likely to enter 2025 on a weak footing, influenced by both market dynamics and the uncertain economic outlook.
Affordability Remains a Key Challenge
Australia’s housing market has been grappling with a crisis fueled by high interest rates, limited housing supply, and significant population growth. Sydney exemplifies this challenge, where the average home price is 13 times the average income, making homeownership increasingly unattainable for many. This affordability crunch has led to stronger growth in the lower quartile of the market, with apartments outperforming houses in terms of price appreciation.
Rental Market Shows Signs of Cooling
The rental market, which has also been under pressure, is showing signs of easing. The rate of rental growth has slowed to 5.3%, down from 8.1% a year ago. “Beyond any seasonal factors, it appears increasingly likely that the rental boom is over,” Lawless commented. This deceleration in rental growth may provide some relief to renters amidst the broader housing market challenges.
Conclusion: Australian Housing Market Faces Headwinds
The Australian housing market is facing significant headwinds as affordability concerns, weakening demand, and rising interest rates contribute to a slowdown in price growth and sales volume. Major cities like Sydney and Melbourne are at the forefront of this trend, while even mid-sized capitals are experiencing a cooling effect. As the market enters 2025, it faces uncertainty, and potential homebuyers and investors will need to navigate a complex landscape. Understanding these dynamics is crucial for making informed decisions in the Australian property market.
