Some Property Defying Slowdown
Australia's property market has surged over the last year, with price records broken time and time again. Despite the global pandemic, 2021 has seen the fastest year-on-year property growth rate in history. Things are slowing down, however, with both Sydney and Melbourne experiencing weaker conditions over the last few months. The market is currently conflicted, with annual growth rates balanced by weaker monthly results. A two-speed market has developed, with A-grade homes in hot suburbs defying the property market slowdown.
According to data from Domain, Australian house prices rose by 21.9% over the last 12 months, which is the fastest annual growth rate on record. More than 446,000 houses were sold in 2021 than the year before, and more than 144,000 units were sold over the same period. Despite this massive price growth, both houses and units remained on the market for the shortest time in more than half a decade. This level of growth can't last forever, however, and the signs of a market shift have already been recognised.
The property landscape is changing, at least in some parts of Australia. With more supply, less demand, and unsustainable price growth, most suburbs have experienced a stabilisation and some have even seen a decline. There are fewer bidders competing at auctions in both Sydney and Melbourne, with rising interest rates and tougher lending restrictions weighing on buyers’ minds. New listings have also increased, with the number of homes available in Melbourne 37.1% higher in November than 12 months before.
In this environment of strong annual results and weak monthly figures, some suburbs and properties are failing to comply. C-grade properties, which include those in need of serious work, those located on main roads, and those compromised by power lines, have struggled to find bidders. B-grade properties, which include average locations, renovation needs, and no parking, are getting some interest. As is often the case, however, A-grade properties are still doing very well.
A-grade homes are purchased by people who don't like to compromise. They have more disposable income, and are less likely to get caught up in short-term property trends. Despite lockdowns, interest rate fears, and uncertain global conditions, premium properties in Sydney and Melbourne are still doing great. For potential buyers of these properties, competition remains tight. For sellers, the market is still favourable despite a slowdown across the rest of the market.
While expensive homes may start to feel the crunch in the months ahead, they are still affected by the runaway momentum of 2021. According to Domain's Chief of Research and Economics Dr Nicola Powell, "The challenge of grappling with a global pandemic shifted buyer priorities, placing a greater emphasis on the space in which we reside, this spurred purchases and brought forward decisions... Ultra-low home loan rates, government stimulus, rebounding economic conditions, returning expats and improved household savings became the perfect combination of factors for extraordinary price growth and activity in 2021."