Is the boom in the Australian property market here to stay?

Although the Australian property market has been steadily increasing in the era of COVID-19, experts predict that this year will be a cooling phase for the housing market. Recent reports from CoreLogic showed that national home prices hit a new cyclical high in January 2022. Home values ​​recorded their highest annual growth rate since June 1989 last month, up 22.4 % over the year.

However, this steady rise in prices may be coming to an end, given the recent slowdown in property prices. The real estate consultant’s report further pointed out that the quarterly change in house prices continued to ease in January, reflecting the long-term trend of slowing growth in most parts of the country.

It should be noted that Australia’s housing boom was supported by massive monetary stimulus provided during the pandemic, including historically low interest rates. However, with the central bank becoming more hawkish, a gradual tightening of monetary policy could reverse this boom in the coming months. Additionally, the scorching real estate market heightened inflation concerns in the country, prompting the central bank to end the bond-buying program.

A cooldown on the way?

Even in 2021, a sharp increase in housing supply was visible when auctions rose sharply in all states. Policymakers adopted a series of tightening measures that helped cool housing demand last year. However, speculation is rife that the price cooling in the real estate market may be here to stay.

With foreign investment regulations remaining tight, experts predict house prices could drop in the coming months. In particular, homebuyers have seen their ability to borrow diminish since the Australian Prudential Regulation Authority (APRA) tightened its mortgage lending regulations.

Under a new plan proposed by the National Affordable Housing Alliance (NAHA), around 15,000 new homes a year could be provided to Australians who need housing but struggle to access it. To finance the supply of new housing, NAHA intends to use non-governmental sources of capital. This rapid increase in supply in the face of relatively stagnant demand could lower the rate of price increases in the real estate market.

Soaring prices: a persistent reality

The observed slowdown in prices has yet to reach the average buyer in the market as consumers continue to observe soaring house prices. House prices rose 1.1% in January, with smaller regions registering larger price increases compared to capital cities.

The average buyer has been hit by the price spike

In fact, housing markets started 2022 with a trend similar to what Australia experienced late last year. In this highly volatile price environment, the only respite offered to market participants is the fact that the rise in values ​​is nowhere near as rapid as at the start of 2021.


House prices have reached crushing levels, from which the journey to cooling prices could be long and arduous. A wrong move by policymakers could lead to a market crash, potentially leading to an economic downturn. Perhaps that is why the Reserve Bank wants to take its time before finally announcing a rate hike. Until a concise timetable for a rate hike is announced, the market could continue to be caught in a whirlwind of exorbitant prices. Meanwhile, any price cooling may be smaller in scale and temporary in nature.