Leaving the market: First home buyers now make up 13.7 per cent of loans, the lowest since 2004. Photo: Louie Douvis
Australia’s housing market is experiencing its strongest run in three years, with Sydney emerging as the engine of growth for the nation.
But rising prices are raising fresh concerns about worsening housing affordability after the limited breathing room delivered by the recent slump is being wiped away.
Affordability constraints are increasingly being flagged as a new danger area, particularly in the country’s east.
The number of finance commitment for first home buyers has plunged nearly 22 per cent in the last year despite the record low interest rate, according to the Bureau of Statistics.
First timers now comprise only 13.7 per cent of loans, which is their lowest market share since early 2004.
“It confirms what we already know – that housing is becoming more and more unaffordable,” said Jacqui Phillips of Australians for Affordable Housing.
“The government needs to talk about the elephant in the room which is the role the current taxation system plays in creating distortions in the housing market, including negative gearing and capital gains tax concessions.”
Capital city dwelling values rose 1.3 per cent in October, the latest in a series of solid months that has pushed the annual growth rate up to 7.9 per cent – the highest it has been since the last boom fizzled in 2010.
The eastern seaboard has been the nexus of activity, with Sydney values rising 2.4 per cent in October after already increasing 2.5 per cent in September, according to new figures from RP Data-Rismark.
‘‘The strength is in those three big cites,’’ analyst Cameron Kusher said. ‘‘Prices are really on a tear in Sydney, and Melbourne is not far behind. Even Brisbane is now showing signs of growth.’’
The solid performance has come after years of underperformance in Sydney, where dwelling values barely kept pace with inflation, RP Data says. The run has seen Sydney values rise 9.1 per cent over their last peak.
Melbourne, where the boom didn’t end until mid 2010, is now experiencing a steady return to growth after flagging for several years. Dwelling values rose 1.2 per cent in October after increasing 2.4 per cent the month before. It now sits just 0.8 per cent below its previous peak.
‘‘From an investors perspective, you’ve lost the chance to enter those markets because yields are falling. The exception is Brisbane where housing is looking a lot more affordable,’’ Mr Kusher said.
In Brisbane, values rose 1.4 per cent for the month but remain 8.4 per cent below their last high.
But the growth is not being evenly spread around the country.
Dwelling values were relatively flat in Adelaide (0.3 per cent) and fell in Perth (-0.2 per cent), Canberra (-1.5 per cent) and Hobart (-2.3 per cent). Darwin’s rose by 1.6 per cent.