House prices rise $1100 a day – has the market peaked?

Sydney house prices have hit a record median of $1.6 million, new figures show, after climbing almost $1100 a day in 2021.  According to Domain figures, Greater Sydney house prices skyrocketed by 33.1 per cent – almost $400,000 – last year, climbing 6 per cent in the final quarter alone to a median of $1,601,467.

It’s the steepest annual increase since Domain records began in 1993, with house prices in half a dozen regions rising more than $500,000.

Unit price growth was more subdued but still rose 8.3 per cent annually – and a marginal 0.9 per cent last quarter – to a record high of $802,255.

Experts suggest that house prices have grown roughly 4 times faster than unit prices over the year, creating a record gap between the two. Such price differences suggests that buyers these days are more willing to pay for space, which is also reflected in the demand for outer suburbs and regions where less units are found.

Commonwealth Bank Head of Australian economics Gareth Aird anticipates price growth would be more subdued in 2022, having previously forecast another 7 per cent growth, with prices to peak in the second half of the year.

However, with Mr Aird and other economists now expecting the Reserve Bank to increase interest rates in August, due to strong inflation, a lower unemployment rate and signs of wage growth, he suggested the market was probably getting towards its top now. The rise in fixed interest rates, already underway, would also impact the flow of credit and weigh on prices, he added.

Westpac senior economist Matthew Hassan said Sydney had seen spectacular growth but prices were likely to moderate and even fall by the end of 2022 as interest rates rise. Westpac increased its fixed rates for owner-occupier and investor loans last week and has predicted an August cash rate rise of 15 basis points. Affordability limitations would also be causing issues for first-home buyers and those looking to get back into the market, Mr Hassan said, easing buyer demand. He suggested that short bursts of sharp price rises were generally followed by a longer period of stabilization.