Is Australia’s Property Boom Over?

It looked like it would go on forever. Now the property boom that enriched boomers and the Australian middle class has met a feral Roo in the middle of the road and come to an abrupt halt.

This property downturn is gearing up to be worst in 40 years. Dwelling prices around Australia are already 6.7% below the March peak after 7 monthly consecutive drops. Brisbane and Perth, the boom markets, are now dropping fastest, with forecast peak-to-trough falls of around 18%, against 16% in Sydney and 13% in Melbourne and Adelaide. Cotality's head of research, Gerard Burg, says the speed of the decline is faster than any downturn of the past four decades.

To highlight how fast things have changed in Australia consider just 1 yr ago the Reserve Bank of Australia left the cash rate at 3.6% - 125 points below where it is now. Higher interest rates, plus the Albanese Government's changes to property tax concessions, may have pushed investors out of the market and tipped it finally into a major correction.

Is this good news for entrants into the property market? Young Australians have been priced out of this market for a long time and new migrants such as doctors with families who want to buy once their permanent residency is approved and foreign purchaser surcharges no longer apply (see our blog on foreign purchaser surcharges), could finally find a way in. However, the challenge is there will be less properties on the market as a result and many buyers will wait to see how low prices can go before committing, Just last weekend less than half of listed homes sold.

At time of writing oil is at AUD$70 a barrel, Australian unemployment rate is 5.5%, interest rates are 4.85% and house prices nationally are down 12% from peak. 

The RBA has warned it could increase interest rates further next year - the future remains unwritten and who knows what geopolitcal events will impact the Australian economy by then.