National home values rose 1.6% in July, taking growth to 16.1% in the past year, according to CoreLogic. However, unsurprisingly, affordability is now taking steam out of the pace of growth.


While we’ve witnessed the fastest pace of growth since 2004, month on month growth rates have been slowing since March this year, when the national index rose 2.8%.


As always, there are several factors behind the slow down. Number one; prices have been rising more per month that incomes are rising in a year. Secondly, although mortgage interest rates remain low, much of the COVID related fiscal support has now expired. This of course affects confidence, a key market driver.


Why being a buyer is so difficult right now


Buyer demand is being fuelled by record low mortgage interest rates as well as the prospect that they will stay low for a long time. The rate of sales of homes is running 40% above the five-year average, but active listings are tracking 26% below the five-year average. So, this mismatch between demand and advertised supply keeps forcing prices up.


Monthly change in capital city home values


Fastest growth since 2004 but losing steam capital cities


Sydney shows the sharpest slowdown


Sydney and Melbourne’s markets account for more than 50% of Australia’s property market, so they’re considered indicative of future trends across the country.


The good news here for first home buyers (FHBs) is that Sydney has recorded the sharpest reduction in its rate of prices growth. Its monthly gain was just 2% in July, which is a significant tumble from the 3.7% it recorded in March.


It’s likely therefore that other capital cities will record similar trajectories in the coming months, providing breathing space for those between homes and more opportunities for FHBs.


Prices rising at above average rates for the rest of the country


Despite Sydney’s slowdown, housing values just keep rising at well above average rates across the rest of the nation. However, previously stronger performance across regional markets relative to capital cities has normalised throughout the course of 2021.


Whereas regional Australia recorded stronger markets in the second half of last year, the first seven months of 2021 show an almost equal rate of growth in dwelling values – with values across combined regional and capital city markets up 14.5% and 14% respectively.


Houses beat apartments for growth


While national house values are up 18.4% over the past 12 months, units achieved just 8.7%.


This disparity is evident in all capitals except Hobart, where unit increased by a whopping 23%, driven by downsizers and empty nesters.


Fastest growth since 2004 but losing steam Hobart



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