Australia’s Home Prices Rise at Highest Rate in More Than Two Years
Synopsis
Australian property prices jumped 1.1 percent in October, the fastest monthly growth in over two years, with investors and first-home buyers competing for a small number of homes on the market. In the past year, national values have risen 6.1 percent as all capital cities record gains. Investors now account for 40 percent of new home loans, compared with 25 percent five years ago. The Reserve Bank is warning that too many investors could drive prices to a dangerously high level. Spring auctions reached record numbers as buyers fear they may miss out on further price rises. Young first buyers sometimes purchase investment properties while living with parents due to high costs.
Australian house prices are going up fast again. New numbers from research company Cotality show national home values jumped 1.1 percent just in October. Over the whole year, they've climbed 6.1 percent. This is the fastest prices have gone up in more than two years. Every capital city saw prices rise with Perth leading the way and Brisbane close behind.
Growth was also big in regional areas outside the cities. They went up 1 percent in October and 7.5 percent over the year. According to Eliza Owen, demand is still way bigger than supply. Not enough homes are available for all the people wanting to buy. She thinks by the end of this year house prices will have jumped 6 or 7 percent total. Next year might see slower growth around 4 or 5 percent but prices will keep climbing.
Investors Coming Back Creates Problems
The Reserve Bank is worried that too many property investors are getting back into the market. Five years ago they made up about a quarter of new home loans, but now they're almost 40 percent of new loans. The Reserve Bank says when lots of investors buy property it pushes prices up faster, and creates bigger risks if the market crashes later.
Investors are beating out first home buyers at auctions because they already own property and have money saved up. First home buyers struggle more with affordability even though the government now lets them buy with just 5 percent deposits instead of 20 percent. George Samios arranges home loans and he's noticed way more investors than first buyers lately. "There are more investors in the market than first home buyers and that is actually making it really hard for first home buyers to get in," he said.
Spring Auctions Hit Records
Real estate agents say both investors and first home buyers are showing up at auctions creating fierce competition. In the week ending October 25 there were 3,253 auctions scheduled. That's almost 4 percent more than the same week last year. People are scared prices will keep going up so they want to buy now.
Jack Rickard sells homes for Ray White in Melbourne. He says investors at his auctions worry the market will go up another 10 percent next year so they want to get in before that happens. Carl and Chris sold their Melbourne home and got way more than their minimum price. The first home buyers who bought it, Angelina Paramita and Ji Yong Song, said getting into the market was really tough. "We went to a couple of auctions and then obviously we got beat out," Paramita said before finally winning one.
Some young first home buyers are doing something different now. Jake Vella is 28 and when he was just 19, he bought his first investment property. He lives with his parents, buying rundown homes, doing them up and renting them out. The money builds up, even though he misses out on first home buyer grants. George Samios says more young people are doing this because house prices to actually live in are too expensive. "Buying a house to live in isn't actually the way people are getting in right now," he said.
News At Glance:
- Australian house prices rose 1.1% in October and 6.1% over the year - the fastest growth in two years.
- The proportion of investors now accounts for 40% of new home loans, compared to 25% five years ago.
- Spring auctions reached record numbers, with 3,253 scheduled in late October, a 4% increase from last year.
- Reserve Bank warns too many investors could push prices too high and cause bigger crash later
- Some first homebuyers now purchase investment properties while continuing to live with their parents as prices remain high.
FAQs
Q: Why are house prices going up so fast?
A: More buyers are in competition because the homes available are limited. Both investors and first home buyers have also become very active since interest rates were cut.
Q: Are investors pushing out first home buyers?
A: Yes, investors are 40 percent of new loans now and they're often beating out first buyers at auctions because they've got more money and they're experienced.
Q: Will prices keep rising next year?
A: Experts think yes but maybe slower. They forecast 4-5% growth in 2026 against 6-7% this year.
Q: Why are young people buying investment properties rather than homes to live in?
A: House prices are so high they can't afford homes to live in. So they buy cheaper investment properties while living with parents to build up money.
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At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
