That's according to the latest REA Insights Housing Market Indicators Report, which found rapidly rising house prices and the qualifying period for HomeBuilder ending are causing buyers to fade from the market, despite record low interest rates.
"While the Australian housing market remains undoubtedly strong, there are some signs that some of the heat has come out of the market," said realestate.com.au director of economic research Cameron Kusher.
"While low borrowing costs remain a strong lure for buyers in this market, an increasing number of buyers have now purchased, incentives have been removed from the market and price increases mean that housing has become less affordable.
"We don’t expect the market to come to a grinding halt, prices are expected to keep rising but we expect that the second half of this year will not see the market quite as strong as it has been over the first half."
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The report, which analyses house hunting behaviours on realestate.com.au by over 12 million Aussies in real-time, found that while many of the metrics analysed remain at elevated levels compared to a year ago, they have eased back from their recent historic highs, pointing to a dampener on the recent buying frenzy.
Key metrics include search activity, email enquiries, views per listing, weekly sales of properties listed for sale, days on site of properties sold, filtered searches by price and by bedroom, and developer enquiries.
The report found email enquiries had fallen for the third successive month while views per listing had also dropped off.
"We expect that views per listing will continue to ease with a heightened volume of new stock coming to the market, sales volumes slowing somewhat and fewer overall buyers searching for properties," Mr Kusher said.
Investors come back into the market as first home buyers back out
The report also found that email enquiries from first home buyers continued to drift lower, accounting for 20.5% of all enquiries, while investor enquiries were up at 17.3% - the highest share since March 2020.
Compared to the same time last year, investor enquiry has seen the biggest increase, up 85.2% year-on-year.
Meanwhile, first home buyer enquiry volumes were only up 0.7% year-on-year, which Mr Kusher says is a sign of things to come.
"With HomeBuilder having now ended it seems likely that first home buyer enquiry will continue to soften while tight rental market conditions and attractive yields and capital growth potential will likely lead to an ongoing uplift in enquiry coming from the investor segment of the market," he said.
Recent data shows new home sales halved nationally in April, a month after the March deadline for buyers to sign contracts for HomeBuilder.
Housing Industry of Australia (HIA) data shows that new home sales fell in April to be 54.4% lower than March.
“This sales result for April 2021 is an encouragingly strong result. It suggests that there is a significant volume of new homes to be built for customers not eligible for HomeBuilder,” said HIA economist Angela Lillicrap.
“There is an unprecedented volume of building starts set to occur in 2021. HomeBuilder and lower interest rates have facilitated a surge in demand for detached homes that ensures a record number of new detached homes will be built this year and into 2022.
“A cooling in sales is to be expected as the grants available through the HomeBuilder program came to an end in March."
Budget papers reveal housing boom "not expected to be sustained"
This year's federal budget papers reveal new housing construction is tipped to stall and for demand for apartments to drop off.
"The near-term outlook for housing activity has strengthened considerably, supported by an elevated pipeline of construction work and rising house prices," the budget papers read.
"However, the policy-driven strength in demand for detached house construction partly reflects a bring-forward in demand from future years and activity is expected to moderate as the current pipeline of work is completed.
"As the outlook for elevated levels of detached house construction unwinds, slower population growth is also expected to limit demand for higher-density dwellings in coming years, such that the recent strength in housing market activity is not expected to be sustained."
The demand for new apartment construction is also tipped to drop off post-pandemic.
"It is not yet clear what structural changes will result from the pandemic, particularly given the greater propensity to work from home during the pandemic.
"Changing preferences for more outer-city, spacious and detached housing may also limit growth in apartment construction in coming years."
What was in the budget for housing affordability?
Housing was a major component of the 2021-22 Budget, as $2 billion worth of investment was included for the following support measures:
- Expanding the First Home Loan Deposit Scheme (now called the New Home Guarantee) with an additional 10,000 places in 2021/22 for first home buyers building or buying a newly-built home;
- Increasing the amount of voluntary superannuation contributions that can be released under the First Home Super Saver Scheme from $30,000 to $50,000;
- Over four financial years, 10,000 spots will be made available for single parents with dependent children to purchase a new or existing home with as little as 2% deposit (avoiding LMI) under the Family Home Guarantee from 1 July 2021;
- Extending the six month construction commencement period for HomeBuilder to 18 months for all existing applicants into 2022.
- Adding an extra $124.7 million in funding for states and territories to bolster public housing stocks
In his Budget Reply last night, Labor Leader Anthony Albanese vowed to tackle housing affordability issues through a $10 billion 'Housing Australia Future Fund'.
This fund would see around 20,000 social housing properties built in the first five years, and Mr Albanese said these plans "will create over 21,500 jobs each year".
Photo by Pat Whelen on Unsplash
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