The current rate at which prices are rising has reached its highest level since the 1980s.

PropTrack economist Paul Ryan said the current rise in home prices, reaching 22% in capital cities, was the third fastest in history, alongside records set in the 1980s and 1950s.

“House prices have skyrocketed lately after initial uncertainty at the start of the COVID-19 pandemic,” Ryan said.

“Exceptionally low borrowing costs and the ability for more people to work from home have led to price hikes across the country, putting pressure on the regional region.”

According to PropTrack, prices rose 111% in 1950, coinciding with the end of wartime price controls.

In the 1980s, the lifting of caps on lending rates, the floating of the Australian dollar and the introduction of competition from foreign banks modernized the lending industry.

This development improved access to credit and helped to ease the house price boom in 1989, when prices rose by 29%.

“While the previous historic periods of very strong price growth have both been followed by price declines, it is difficult to see the same downturn in the current market, at least in the short term,” Ryan said.

Mr Ryan noted that the intervention of the Australian Prudential Regulation Authority (APRA) is a factor that could slow price increases, but said that lending conditions remain very favourable.

Price increases are likely to slow

Based on the PropTrack forecast, Australia’s price growth is likely to remain solid over the next year.

“While the high number of property listings, particularly in Sydney and Melbourne as they emerge from the most recent lockdowns, may put some downward pressure on prices, a very large number of buyers remain in the market waiting to find their new homes,” said Mr Ryan.

Insights from CommBank show similar forecasts, with the housing market expected to end at the end of 2022 with 7% higher prices compared to 2021.

By the end of 2022, prices are likely to peak, which could lead to an orderly correction of 10% in 2023.

Photo by Daniel Chen on Unpslash.

Top Suburbs: Eagle Vale, Mt Gravatt, Coorparoo, Albion, Newtown

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