Finance Property The silent factor that’s putting upwards pressure on Australian house prices

The silent factor that’s putting upwards pressure on Australian house prices

An imbalance between supply and demand is putting upward pressure on house prices. Photo: TND
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It’s hard to believe, but Australian house prices have broken new ground despite the country’s first recession in 30 years.

Although unemployment remains well above pre-pandemic levels and international demand for property has plunged, Australia’s median property price hit a new record high in January, according to fresh data from CoreLogic.

The revelation came as separate figures released by the ABS showed the value of new home-loan lending climbed 8.6 per cent in December to a historic $26 billion.

The data showed the number of first-home buyer mortgages rose to its highest level since June 2009 – accounting for a third of new owner-occupier financing – as the value of the average loan to first-home buyers rose by $10,000.

As has already been reported by The New Daily, the momentum in the property market has largely been driven by rock-bottom interest rates, generous government grants, and buoyant consumer sentiment.

But analysts say a severe shortage of homes is also putting upward pressure on prices.

According to CoreLogic, the number of homes on the market nationally is down 27.8 per cent on 2020, with detached housing in particular falling well behind previous years.

On the other hand, the number of sales over the three months to January rocketed up 23.9 per cent when compared to the same period last year.

CoreLogic research director Tim Lawless told The New Daily that even though Australia is now (broadly speaking) a “seller’s market”, existing home owners have yet to respond.

But he said the reasons why remain a mystery.

“It could come back to some uncertainty not showing up in consumer sentiment figures, maybe people are a little warier of making such a high-calibre decision, particularly in selling,” Mr Lawless said.

“But it may also come back to the current speed of the marketplace, with a lot of people fearing [that] if they put their property on the market, they might not be able to re-buy at similar values.”

Mr Lawless said the imbalance between the number of interested buyers and available properties over the past three months saw prices shoot up in Victoria’s Mornington Peninsula (7.4 per cent), Darwin (6.6 per cent) and Richmond-Tweed, which encompasses Byron Bay (6.1 per cent).


AMP Capital chief economist Shane Oliver said it was common for listings to lag behind prices and auction clearance rates during a housing upswing, as vendors took time to evaluate whether price rises were sustainable.

Clearance rates in Melbourne, Sydney, Adelaide and Canberra topped 80 per cent over the weekend, according to CoreLogic.

But what makes this recovery different is that collapsing demand seen elsewhere in the economy has not shown up in the property market, as government incentives have papered over any cracks.

“The current figures reflect a small subset of the total market at one point in time, so it right now only reflects motivated buyers and sellers,” Dr Oliver told The New Daily. 

“It may likely be that a great bulk of Australians are feeling like they have a big enough mortgage as it is, or are feeling high levels of anxiety about the recovery, and if they transact, there are associated costs and they’re taking on more debt.”

However, Dr Oliver expects the number of newly-advertised homes to start climbing “within the next few months”.

If international border closures remain in place for much longer, or available homes continue to outnumber interested buyers, it could result in lower house prices if incentives created an “air pocket” in demand, he said.

“It’s the big unknown, although my view remains that prices will go up for the year,” he said.

“This recovery looks real, and I think incentives played the biggest role.”

PRD Research chief economist Diaswati Mardiasmo said if supply caught up with demand, priced-out buyers would likely find more opportunities to buy into suburbs close to popular schools and amenities.

This is because price growth would moderate without the market suffering a crash, she said.

“Many people might say the price in a particular suburb has gone down 1 per cent and classify that as a crash, but that’s not really the case as from a 10-year perspective, prices have gone up double digits,” Dr Mardiasmo told The New Daily. 

“Affordability has dwindled down because of a supply-demand imbalance in places like South Australia, Tasmania, even Brisbane, which means for the average household, you have to fork out more towards your house unless the equation rebalances.”