Australia’s housing market breaks another record – but could the bubble be about to burst?

Australia’s housing market has set another record, according to new industry research, with more than one in five homes selling for $1 million or more.

Market analyst CoreLogic reported 596,733 this week sale nationally for the year to March 2022 – up 19.8 percent from 497,923 sales a year earlier.

Of the nearly 600,000 sales, nearly a quarter were sold for $1 million or more.

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CoreLogic research analyst Kaytlin Ezzy said the spike was caused by factors that could burst the bubble around this time next year.

Australia’s housing market has set another record, with more than one in five homes selling for $1 million or more in a year. Credit: MONKEY

“High consumer confidence, tight advertised supply and low interest rates fueled strong home value growth in 2021, resulting in a new record high annual growth rate of 22.4 percent for the 12 months to January,” said Ezzy.

“Despite values ​​rising annually in all capital cities and the rest of the state, we have seen a divergence in growth conditions between markets so far.

“Since January, housing values ​​in Sydney and Melbourne have started to fall, while values ​​in South Australia and Queensland have continued to rise.

“More recently, Canberra, which had previously recorded many months of consecutive growth, registered its first declines in home values ​​in several years in May.”

Sydney’s suburbs accounted for more than 26 percent of new million-dollar markets.

Sydney’s suburbs accounted for more than 26 percent of new million-dollar markets. Credit: MONKEY

The average home value has been above $1 million in the port city since May 2021.

But where do the largest transactions – the so-called trophy sales – take place?

Darling Point, Sydney’s eastern suburb, claims victory for the 12 months to March 2022, with a six-bedroom, six-bathroom waterfront home selling for $60 million.

In Melbourne, a five-bedroom property in Toorak was sold for $38.5 million.

The most expensive regional sale to date this year was a six-bedroom beachfront home on the Gold Coast’s millionaires’ row, in Mermaid Beach, which sold for $21.5 million.

Median days on the home market across Australia have risen from 20 to 28 days in six months. Credit: MONKEY

But could the bubble be about to burst?

Ezzy says housing demand, transactions and median values ​​in Australia have gradually declined in recent months.

That, coupled with growing global uncertainty and affordability constraints, could calm the now booming market.

“As the market enters the downward phase of the cycle, it is likely that some of the recent million-dollar entrants will see their median value drop below $1 million,” she said.

“Despite this, Australian household wealth reached an all-time high at the end of the March quarter, driven by continued strength in the housing market, largely driven by gains in the property sector.”

Financial regulators are watching closely

Australia’s financial regulators are closely monitoring how rising official interest rates affect mortgages and the housing market.

The Council of Financial Regulators – the Reserve Bank of Australia, Treasury, the Australian Prudential Regulation Authority and the Australian Securities and Investment Commission – held its quarterly meeting on June 20.

It notes that housing market indicators suggest that activity in major cities has slowed in recent months and that house price growth has slowed nationally, although home loans are only just beginning to decline.

“The council will closely monitor the effects of rising interest rates on the household sector,” he said on Thursday.

“Members emphasized the added resilience provided by the significant equity and payment buffers that households have built up since the start of the pandemic.”

Australia’s financial regulators are closely monitoring how rising official interest rates affect mortgages and the housing market. Credit: LUKAS COCHMONKEY IMAGE

The RBA has raised official cash interest rates twice in the past two months — to 0.85 percent from a record 0.1 percent low — in the face of explosive inflation.

Economists expect the RBA to raise spot interest rates by an additional 50 basis points during its July 5 board meeting, corresponding to the June hike, the largest move since February 2000.

Further hikes are expected to bring the cash interest rate to at least 2 percent by early 2023.

– with AAP

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