First home buyers priced out as Aussie property boom continues, but surge tipped to slow next year

Homeowners are cheering the ongoing surge in residential property prices but it’s seriously discouraging first home buyers, particularly in NSW and the ACT, where median values are highest in the nation and keep rising.

According to the latest CoreLogic monthly property values data, dwelling prices surged 13.5 per cent nationally over the year to June 30, but new National Australia Bank research suggests there’s still momentum in the housing market.

The bank has upgraded its forecast for property price growth for this calendar year, now tipping 18.5 per cent nationally, but revised its prediction for 2022 to four per cent, with prices for houses expected to continue lifting at a faster rate than units, which have been hit by slowing population growth in major cities.

“Low (interest) rates and strong income support have seen strong price growth in 2021, but this impact will begin to fade,” NAB Group Economics said in the report on Tuesday.

First home buyers priced out as Aussie property boom continues, but surge tipped to slow next year

Camera IconIngrid Scott is in her 20s and bought an apartment in Brunswick last year – but she started saving straight after high school. Mark Stewart Credit: News Corp Australia

Housing affordability is starting to weigh heavily, particularly on first home buyers, with government incentives only “moderately” significant in helping them get into the market earlier, NAB says, suggesting many would-be first time property owners have been priced out.

“Rising house prices have had a bigger (negative) impact (than the positive impact of incentives), particularly in NSW,” the bank said.

“Affordability constraints will likely begin to bind over the year and see a slowing in price growth as the impact of lower rates fades.”

NAB predicts the strongest capital city price rise this year will be in Hobart, surging 23.5 per cent, followed by Sydney at 21.6 per cent, Brisbane at 19.5 per cent and Melbourne at 17.6 per cent.

Next year, it expects Melbourne price rises to outpace Sydney at 3.5 per cent compared to 3.1 per cent, respectively.

First home buyers priced out as Aussie property boom continues, but surge tipped to slow next year

Camera IconEven run-down fibros like this have sold at auction for more than double the reserve. When the out-of-area seller found out, they thought it was a joke. Credit: Supplied

The best value growth in 2022, however, is tipped to be in Brisbane, up 4.4 per cent.

The report also showed first home buyers remained the most active buyers of new homes, with their total share of sales having doubled since NAB started tracking the data in late 2014.

But a lack of development sites was a big impediment in the June quarter, particularly in NSW and Victoria.

“The impact of construction costs climbed sharply and it has now emerged as the next biggest constraint (and ‘very significant’ in WA),” the report read.

Local investors, who took to the sidelines as the pandemic took hold last year, have risen over the past six months and were most active in NSW, WA and Victoria.

First home buyers priced out as Aussie property boom continues, but surge tipped to slow next year

Camera IconNSW auctioneer Andrew Cooley drops the hammer on a house via an online auction. Credit: Supplied

Unsurprisingly, with international borders remaining closed, foreign buyers in both new and established property markets continued to fall to survey lows of 2.3 per cent and two per cent, respectively.

They were now “bit players after having played a very significant role during the middle years of the 2010s”, NAB said.

Also this week, CoreLogic data showed the June quarter had been the busiest three month period for the number of auctions held since the December 2017 quarter.

The group’s head of research, Eliza Owen, said this reflected ongoing strong housing market conditions, however, there was an easing in the clearance rate, reflecting a broader loss of momentum “as affordability constraints set in”.

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