The Australian property market is expected to reach its peak within the next three to six months, according to a leading analyst, but potential homebuyers should not anticipate substantial price relief. The forecast comes amid ongoing concerns about housing affordability and supply constraints across the country.
Market Peak on the Horizon
Property analyst Louis Christopher, managing director of SQM Research, has indicated that the current upswing in the housing market is likely to top out in the second half of 2023. He noted that while price growth is slowing, a sharp decline is not on the cards. "We are seeing the market peak, but it's more of a plateau than a cliff," Christopher said.
The analyst pointed to several factors contributing to the moderation, including rising interest rates, tighter lending conditions, and increased listings. However, he emphasised that the fundamental imbalance between supply and demand will prevent prices from falling significantly.
Supply Constraints Remain
One of the key drivers of high property prices has been the chronic undersupply of housing, particularly in major cities like Sydney and Melbourne. Despite government efforts to boost construction, building approvals have been slow to translate into completed dwellings. "We are still not building enough homes to meet population growth," Christopher said. "Until that changes, we won't see a major correction."
The analyst also highlighted the impact of immigration, which has rebounded strongly post-pandemic, adding to housing demand. With borders reopened, the influx of overseas students and workers is putting additional pressure on the rental market and, by extension, on property prices.
Interest Rates and Affordability
The Reserve Bank of Australia's (RBA) aggressive interest rate hikes have been a major factor in cooling the market. Since May 2022, the cash rate has risen from 0.1% to 4.1%, the highest level in over a decade. This has reduced borrowing capacity and dampened buyer enthusiasm.
However, Christopher noted that many homeowners have built up substantial equity during the pandemic, buffering them from the impact of higher repayments. "We are not seeing forced selling at this stage," he said. "Most borrowers are still able to service their loans, which is supporting prices."
First-home buyers, on the other hand, are finding it increasingly difficult to enter the market. With property prices still elevated and mortgage rates higher, many are being priced out. "The dream of homeownership is becoming more elusive for many Australians," Christopher said.
Regional Markets and Outlook
The analyst also noted that regional areas, which saw a surge in demand during the pandemic, are now experiencing a slowdown. As more workers return to city offices, the appeal of regional living has waned. "We are seeing a rebalancing, with some regional markets declining while inner-city areas stabilise," he said.
Looking ahead, Christopher expects the market to remain relatively flat for the next 12 to 18 months, with modest price movements in either direction. He advised buyers to be patient and not to expect a fire sale. "If you are waiting for a crash, you might be disappointed," he said. "The most likely scenario is a soft landing."
In summary, the property market is set to peak soon, but affordability challenges and supply shortages will persist, meaning significant price relief is unlikely in the near term.
