Australia's Booming Real Estate Market Sees a Slight Cool Down

Written By Laura Schier | July 31, 2018 | Published in Real Estate Market Trends
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Australia has become one of the hottest spots for the pricey real estate in the world, with the value of homes in both Melbourne and Sydney rising by over 50 percent in just the past six years. Both cities have been ranked high on the list of global areas with the most expensive housing, with prices reaching even higher than London and New York real estate. In fact, rising prices in Sydney and Melbourne caused many homeowners to become millionaires, and left many potential homebuyers worried that they will never be able to purchase a home. 

While the Australian market has been booming for the past few years, it recently experienced a slight drop. Since the market reached its peak in November, home prices have fallen by about 6 percent. 

The recent cool down is not expected to last long, however, as many economists think that housing prices will be on the rise again in the near future. The New York Times noted, however, that if the market slump does last for a significant amount of time, consumer spending may decrease and homeowners who borrowed money for mortgages could face more pressure. Since global interest rates are on the rise, residents in Australia may have to pay higher interest payments, as many have been using adjustable-rate mortgages. Richard Holden, a professor of economics at the University of New South Wales, stated that if many Australian homeowners have to sell their houses, that may be “the biggest match that could ignite things.”

Sydney and Melbourne make up an impressive amount of Australia’s real estate, accounting for 40 percent of the population and represent an estimated two-thirds of the Australian real estate market by value. During the recent cool down in the market, home values in both cities have fallen; Sydney saw some areas drop in value by over 10 percent, according to data provider Corelogic. So far in 2018, Melbourne has seen price decreases by almost 2 percent, and home values in Sydney dropped by over 2 percent. Some reasons for these decreases are home prices experiencing increases too quickly, and new restrictions imposed on foreign buyers.

Luckily, Australia has fared relatively well during the market slump, as it has not seen much damage to its economy. And things are likely to start looking up soon; financial intelligence firm Moody Analytics expects home prices to rise by the end of this year.

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