Our property markets ended the year strongly, with buyer demand pushing prices up almost everywhere as home buyers respond to lower borrowing costs and repayment buffers, plus grants, incentives and stamp duty waivers.
Not only are these easier and cheaper borrowing conditions encouraging more buyers to enter the market, but they also give buyers more borrowing power.
The charge is being led by first home buyers, which is why the price growth has been highest in the cheapest capital cities, where more homes are priced within their reach.
As the following graph shows, the percentage change in prices for the last quarter of 2020 was greatest in lower priced cities and lowest where median prices were highest.
The one notable exception was Canberra, whose property market continues to outperform the State capital cities as we publicly predicted in the property media earlier this year.
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When will this demand slow down?
When prices once again become unaffordable for first home buyers, will demand slow down?
The answer is that the growth in lower priced areas will encourage existing home owners to use their increased equity and the availability of cheaper finance to upgrade to better homes in more suitable areas.
This means that demand will ripple to those areas, putting pressure on prices to increase there as well.
Once prices have reached the higher borrowing capacity of upgrading buyers, the market will slow down again, but in short, we have nothing to fear from the future performance of our property markets and everything to hope for.