Brisbane is the most vulnerable of the booming capitals amid worsening affordability, experts say.
Some weak spots are emerging in Adelaide, Brisbane, and Perth as affordability concerns finally catch up with the outperformers in the national housing market, data from CoreLogic shows.
In the past three months, 15 suburbs in Brisbane and three in Adelaide posted a decline in house prices.
While house prices in every Perth suburb increased during the same period, prices across a large chunk of them are now rising at a dramatically slower pace.
Nearly half of all Brisbane suburbs racked up lower price growth in three months to July 31, compared to the previous quarter.
In Perth, house prices in nearly two out of five suburbs are now rising at a slower pace and are decelerating in one out of six Adelaide suburbs, although from a high base.
House prices in some of the more expensive suburbs led the decline of up to 1.5 per cent, indicating a cap on how high values could rise, said Eliza Owen, CoreLogic’s head of research.
“It’s fair to say that affordability constraints are starting to put pressure on the higher end of the market, even in those booming cities,” she said.
“These suburbs could, in fact, be a bellwether for where the limit of house price growth is, particularly in Brisbane.
“Brisbane is starting to mirror what you see in the Sydney and Melbourne market where the high interest rate environment and affordability constraints start to put downward pressure on growth at the high end.”
Brisbane’s home values rose by 3.4 per cent in the past three months, which is lower than the 4.1 per cent growth recorded over the three months to April 30, and down from the 4.7 per cent gain this time last year.
House price growth slowed slightly to 6.2 per cent in Perth and accelerated to 5.8 per cent in Adelaide.
Despite the slower growth, Brisbane’s home values are now the second highest in the country at $873,987 after overtaking Canberra and Melbourne.
Perth, on the other hand, remains the cheapest major housing market with a price at $773,335 which is lower than Adelaide’s $776,597 median value as at July 31.
“I think in the near term, Brisbane is the most vulnerable of those three capitals because not only is this market becoming less and less affordable, it’s becoming one of the most expensive cities in Australia,” Ms Owen said.
“Economic conditions there are softening, and already you’ve got more suburbs moving into a decline, so it’s clear that Brisbane is starting to hit a bit of a limit, particularly in the high end.
“Overall, Perth and Adelaide remain pretty strong. Brisbane, I think, is where it’s getting close to crunch time.”
Brisbane suburbs Carina Heights, Bulimba, Camp Hill and Scarborough, with the median house price of between $1.05 million and $2.04 million, racked up the largest decline in the past three months.
Values there dropped between 1.1 per cent and 1.5 per cent, which are around three times slower than the previous quarter.
House prices also fell in Redcliffe, Ormiston, Hawthorne, Newport, Eight Mile Plains, Lamb Island and Beachmere, which slipped between 0.2 per cent and 1.1 per cent.
In Adelaide, Central and Adelaide Hills suburbs Marden, Stirling and Aldgate were the three suburbs posting house price declines. In the past three months, they fell by 1.4 per cent, 1 per cent and 0.1 per cent respectively.
Across Perth, North Coogee in the south-west posted the sharpest drop in growth rates at 5.5 per cent, down from 11 per cent in the previous three months.
Watermans Bay in the north-west and Kiara in the north-east also slowed sharply, with prices rising by 5.9 per cent and 6.1 per cent respectively, which are more than three times smaller than the previous three months.
“The signs of a slowdown, which at this stage are more evident in Brisbane, likely reflect property prices starting to run into affordability constraints after very strong increases relative to incomes in those cities,” said AMP chief economist Shane Oliver.
“The incentive to relocate there is fading and this will weigh on interstate migration to Queensland.
“Adelaide median dwelling prices are now just $5000 below those in Melbourne, and it offers more limited job prospects so the incentive to relocate there is also fading.
“Perth has shot up, but it’s still a bit cheaper than Adelaide and its very strong economy should at least provide an offset and keep interstate migration to WA strong, which in turn will likely keep its property market strong for a while yet, albeit the pace of gains may slow.”
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