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Is the Australian property market slowing down?


Latest data from CoreLogic reports that Australian property prices have again increased by 1.6 per cent in July 2021, contributing to a 14.1 per cent rise over the first seven months of 2021 and a yearly rise of 16.1 per cent. 

What’s happening in the property market?

With every capital city and state region recording annual growth, it appears this is one of the broadest property booms on record. 

Tim Lawless, Research Director at CoreLogic has come out stating that the national housing value growth our property market has experienced over the past year is the fastest pace of annual growth recorded since February 2004. The national housing values have lifted 16.1 per cent over the past year.

However, while property prices remain strong, the market is beginning to soften.

“The monthly growth rate has been trending lower since March this year when the national index rose 2.8 per cent,” Mr Lawless explained.

Several factors appear to be contributing to the softening market including a decline in affordability.

Mr Lawless points out that “with dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community”.

In Melbourne, house prices rose 1.3 per cent in July 2021, being 10.4 per cent higher over the past 12 months.

Prices rose in Brisbane by 2 per cent in July 2021, bringing the total to 15.9 per cent higher over the past 12 months.

Darwin recorded the highest annual growth rate of 23.4 per cent.

Nationally, houses continued to record much stronger growth in values relative to units.

Overall, Australian house values have increased 18.4 per cent over the past year while unit values have risen by less than half this amount, up 8.7 per cent.

Sydney, however, recorded the biggest reduction across capital cities, with the monthly capital gain falling from 3.7 per cent in March 2021, to 2 per cent in July 2021.

“Worsening affordability is likely a key contributing factor in the slowdown, along with the negative impact on consumer sentiment as the city moves through an extended lockdown period,” Mr Lawless stated when discussing the property market in Sydney.

Are restrictions coming?

Although it appears record low mortgage rates are upholding the national property demand, the house price boom could prompt Australian Prudential Regulation Authority (APRA) regulation to cool prices.   

Mortgage lending growth was running at a three-month annualised rate of 7 per cent in June 2021, the highest level since 2015, reported by Macquarie Bank.

Macquarie states that while the Australian Prudential Regulation Authority and the Reserve Bank of Australia “have repeatedly reminded the market that macroprudential measures are generally not designed to control house prices”, these regulators are unlikely to sit by and watch credit growth climb further, and APRA will most likely impose ‘macroprudential’ curbs on mortgages to cool the market.

Some of the restrictions that may be explored could include:

  • Loan-to-value ratio (LVR) restrictions;
  • Debt-to-income (DTI) restrictions;
  • Increased mortgage buffers; or
  • Restrictions on interest-only lending.

These types of restrictions were imposed by APRA in December 2014, where APRA introduced a 10 per cent cap on investor mortgage growth. In 2017, APRA followed this up with a cap on interest-only lending, which was restricted to 30 per cent of all new residential mortgage lending.

Australian banks can arguably state that the current housing price boom is very different to that seen in 2014 and 2017, when it was residential property investors that were driving the market. However, even if it is owner-occupiers rather than investors who are driving the current property price boom during the COVID-19 pandemic, Macquarie argues the prospect of macroprudential intervention is rising, as overall credit growth moves towards double digits.

Interest Rates

With the closure of the Reserve Bank’s Term Funding Facility (TFF), which was shut to new drawdowns on June 30, 2021, fixed mortgage rates could also rise moderately.

Low-cost three-year funding was provided by the TFF to banks to support the supply of credit. It was highly successful in replacing more expensive wholesale funding and driving fixed mortgage rates lower.

Now with the TFF closed, average mortgage rates could rise from their record lows and we may see reduced mortgage and property price growth in 2022.  

However, Tim Lawless argues that “interest rates will remain low for an extended period of time.”

“Dwelling sales are tracking approximately 40% above the five-year average, while active listings remain about -26% below the five-year average,” Mr Lawless explains.

The discrepancy between demand versus supply may remain a key factor of putting high pressure on housing prices, according to Mr Lawless.

Australian property for the next six months

Although the number of home sales have been well above average, CoreLogic expects this to slow down over the next six months.

“With affordability constraints starting to impact purchasing capacity, it’s possible market activity could reduce through the second half of the year, helping to rebalance the market and take some heat out of the rate of house price growth,” Mr Lawless said.

According to Domain, Australia’s median house price has reached $955,927, a 5.8 per cent increase over the quarter. Domain has predicted the below price changes for the remainder of 2021:

2021 price change predictions by state

Source: Finder RBA Cash Rate Survey June 2021, Corelogic Data


Attwood Marshall Lawyers – taking the stress out of buying and selling property

At Attwood Marshall Lawyers, we have the team and systems in place to help people quickly so that they can be supported through the buying and selling process and make an informed decision.

We are ready to assist with drafting terms and conditions, reviewing contracts, and providing advice for all property related matters.

As a PEXA certified law firm, we strive to ensure settlements proceed smoothly and happen on time, without any surprises along the way.

If you or your clients require advice outside of regular business hours, our Robina Town Centre office is open Thursday night until 9pm and Saturday morning until 12noon. Our team can also be contacted on our 24/7 phone line on 1800 621 071.

With conveniently located offices at Coolangatta, Kingscliff, Robina Town Centre, Brisbane, Sydney, and Melbourne, you can visit a lawyer at a location near you.

For help with a property related enquiry, contact Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, mobile 0432 857 300 or email

Read more:

First-home buyers to get budget help to enter soaring property market

Stamp duty begone! NSW property sales could surge by 50 per cent or more if Government implements new tax regime

Wealthy Americans have their eye on Australian property




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Jess Kimpton - Department Manager - Property & Commercial Attwood Marshall lawyers

Jess Kimpton

Department Manager
Property & Commercial

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The contents of this article are considered accurate as at the date of publication. The information contained in this article does not constitute legal advice and is of a general nature only. Readers should seek legal advice about their specific circumstances. 

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