Home prices skyrocketed 22% in 2021

However, "storm clouds are gathering for the property boom," economist warns

Home prices skyrocketed 22% in 2021

Australian housing prices spiked by 22% last year – the sharpest rise since the 1980s.

Australia’s median property price rose by 1%  to $709,803 in December – the 15th straight month of gains, according to a report by ABC News. However, prices have been rising at a slower pace each month as booming home values shut more and more prospective buyers out of the market.

Sydney saw a small increase of 0.3% in December, while Melbourne prices fell by 0.1%, according to data from CoreLogic.

“A surge in freshly advertised listings through December has been a key factor in taking some heat out of the Melbourne and Sydney housing markets,” said Tim Lawless, research director at CoreLogic. Lawless said Sydney and Melbourne prices were also impacted by “demand headwinds caused by significant affordability constraints and negative interstate migration.”

While Sydney, Melbourne and Perth have seen slowing in price gains, prices in other capital cities spiked sharply, ABC News reported. Prices in Brisbane rose by 2.9% last month, while Adelaide prices lifted 2.6%.

For the second straight year, prices in regional areas rose at a much faster rate than prices in the capital cities. Since March 2020, housing prices across regional Australia have skyrocketed 32%, compared to a 20% rise across the combined capitals, ABC News reported.

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However, AMP chief economist Shane Oliver said in a recent investor note that “storm clouds are gathering for the property boom.”

“We expect a further slowing in national home price gains ahead of a peak and then price falls from later this year and in 2023,” Oliver said. He said the slowdown would be driven by poor affordability, rising mortgage rates and higher interest rate buffers.

“It’s unclear what impact the latest COVID wave, driven by the Omicron variant, will have on the property market,” Oliver said. “It will likely reduce buyer confidence, but it could also dampen listings.”