Why Australia’s Hot Real Estate Market Is Cooling Down

Business Industry

Australia is known as one of the hottest real estate markets in the world because of its unstoppable run of soaring valuations but recently house prices in major cities have begun to slide. Last November, house prices fell by 1.4% in Sydney which is Australia’s biggest and most expensive housing market. According to data from a global research firm Core Logic RP Data, prices in Melbourne also fell by 3.5%.

The sudden pullback of Australia’s major market exposed some sustainability questions on international urban real estate hot spots all over the world like Vancouver and Toronto. Five of Australia’s eight capital cities are experiencing a slump in housing prices with Hobart, Darwin and Canberra prices on the decline. Adelaide, Brisbane and Perth are showing slight price increases at 7%, 6% and 3% respectively.

According to the research, the housing market is moving through the peak of the cycle at a time when new large dwellings are being constructed. The housing slump is due to a tighter lending environment, less appetite for risks among investors and affordability constraints particularly in the major housing markets of Melbourne and Sydney where the average price of a home is Australian $810,000 ($790,000).

Because of the recent increase in house prices, international demand from mainland China was reduced and some real estate agents have reportedly convinced some sellers to drop their asking prices. On the other hand, Vancouver Canada is not experiencing a dip in local prices of homes and it is not lacking in international interest.

Australia and Canadian markets are both exposed to a huge slide in commodity prices and they have both experienced hot housing markets in recent years. Housing prices have also been boosted by the high demand from Mainland China. People are curious about the housing bubble but at the end of the day, real estate relies on supply and demand.

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