House hunters could soon breathe a sigh of relief, as Domain economists have called time on Australia’s property boom.

Melbourne and Sydney, the nation's heavy lifters, reported sharp declines in the rate of house price growth in the September quarter, with most other capitals also recording weakening market activity.

Sydney in particular experienced the lowest quarterly growth rate in more than a year and a half, according to Domain's September House Price Report.  And housing markets across the country are in for moderate to modest growth in the coming months as record low interest rates lose their kick.

With the cash rate steady since May and income growth remaining sluggish, the capacity for house price growth is easing, Domain senior economist Andrew Wilson said.

"Even if we get a cut in November, we're still seeing higher mortgage rates for investors and Westpac's owner occupier rate increase dampening the market," Dr Wilson said.

The median house price in Sydney rose 3.2 per cent over the three months to September - the lowest quarterly rate of growth recorded since March 2014.  That's down from 7.7 per cent in the previous quarter, while Melbourne had a growth rate of 2.8 per cent, down from six per cent.

"It's better than a halving of the June quarter results," Dr Wilson said.

"We had auction clearance rates in Sydney rising to nearly 90 per cent in May... they've fallen sharply over the last month with a rate of 65 per cent last weekend."

The Reserve Bank has noted signs of easing house price growth in Sydney, but stressed it was too early to know if this trend would last.  And prices in the big two are still strong, despite growing at a slower pace, Dr Wilson said.

"Melbourne's median house price increased by 15.6 per cent over the year, which was the highest annual result recorded since June 2010," he said.

And Sydney's house prices have increased by a remarkable 21.7 per cent over the year ending September.

Nevertheless, the extraordinary price levels seen in the harbour city during the past three years are clearly receding, Dr Wilson said.

And Australia's two largest cities have been standalone success markets.  Brisbane's property market remains flat while Perth and Darwin house prices tracked backwards in the September quarter.

"Resource states, QLD, WA and NT, (are) the clear underperformers as a consequence of weakening economies," Dr Wilson said.

  • If this is indeed the case, then it is certainly a good thing and is not before time. Already, median house prices in Australia have risen from around five times average annual incomes to around eight years – consigning the average Australian to a lifetime of household debt. The current rate of price growth is unsustainable and if not slowed will just see the dream of home ownership slip away from more and more young Australians.

    To be sure, the current price surge in Sydney was probably necessary in order to stimulate sluggish building activity. But we cannot go on forcing more and more young Australians to take on more and more debt.

  • As with any asset bubble was bound to occur sooner or later – it's impossible for prices to rise indefinitely, irrespective of how much the Reserve Bank continues to trim rates. The Great China Slowdown will no doubt exacerbate the property bust.

  • I have been house hunting for 4 months (as per my column on the other page!). I keep telling people that the market in Brisbane is quiet but people won't/don't believe me. When I first started looking (June 2015) there were lots of buyers… Now I am often the only person at an open for inspection. I am hounded by estate agents phoning desperate to get a sale. The estate agents carry on as though everyone in Brisbane is on a salary of $600,000 and everyone has a few million dollars sat in the bank in cash but when you do your personal due diligence and research it seems there are are lots of people in Brisbane desperate to get rid of investment properties as well as owner occupiers keen to move somewhere smaller/cheaper because of job insecurity. I may be totally wrong – I am happy to be proven wrong (!) – but these are my first hand observations of the situation.

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