The pandemic property boom is running out of steam in Sydney and Melbourne but surging ahead in Brisbane and Adelaide.

Data released by CoreLogic on Wednesday shows price growth in Australia’s two largest cities is tapering off as more properties are put up for sale and a growing number of people are priced out of the market.

But a steady stream of interstate migrants in Queensland and South Australia is combining with more affordable prices, limited stock, and fewer COVID disruptions there to deliver some of the states’ fastest price growth in decades.

In November, Brisbane experienced its fastest rate of monthly growth since October 2003 (2.9 per cent), while Adelaide experienced its fastest rate of growth since February 1993 (2.5 per cent).

“Relative to the larger cities, housing affordability is less pressing, there have been fewer disruptions from COVID lockdowns and a positive rate of interstate migration is fuelling housing demand,” CoreLogic research director Tim Lawless said of Brisbane and Adelaide.

Meanwhile, in Sydney and Melbourne, monthly growth slowed to 0.9 per cent and 0.6 per cent respectively.

Mr Lawless said demand had fallen in the two biggest cities because buyers had been priced out of the market and many residents had moved interstate or overseas.

Growth to slow in 2022

As for the broader picture, national values rose by 1.3 per cent in November – simultaneously the 14th consecutive month of price growth and the smallest increase since January.

Mr Lawless said the pace of growth in the current upswing seems to have peaked in March, when national values rose by 2.8 per cent.

Growth has been trending downwards since then – and property analysts expect that trend to continue.

AMP Capital chief economist Shane Oliver said house prices could fall by 5 per cent in 2022, and by more than 10 per cent in 2023.

Mr Lawless said: “Virtually every factor that has driven housing values higher has lost some potency over recent months.

“Fixed mortgage rates are rising, higher listings are taking some urgency away from buyers, affordability has become a more substantial barrier to entry, and credit is less available.”

Factors weighing on prices

Dr Oliver said one of the biggest factors in the national house price slowdown was the tightening of lending standards by the Australian Prudential Regulation Authority (APRA).

Thanks to rules that came into effect on November 1, banks must now make sure borrowers can service their loans if interest rates were to rise by 3 percentage points, up from the previous 2.5 percentage-point buffer.

The changes are expected to cut the average home buyer’s borrowing capacity by about 5 per cent.

“It’s a tougher hurdle to get a loan now,” Dr Oliver said.

He added that rising fixed mortgage rates and poor affordability are “crimping demand” on the surging supply of houses, which in turn has driven down prices.

RBA to sit on its hands

Dr Oliver said APRA and the Reserve Bank of Australia (RBA) are probably pleased the housing market is cooling down.

He expects them to sit back and observe the impacts of their recent moves before taking any further action.

These moves include APRA’s new lending rules and the RBA’s insistence that the official cash rate will remain unchanged until 2024, which is when the central bank expects annual inflation to rise to its target band of 2 to 3 per cent.

In contrast to the RBA, Dr Oliver and Mr Lawless said rates could rise by the end of 2022.

Dr Oliver said the reopening of the economy will push down unemployment and push up wages growth, which will enable the RBA to raise rates by the end of next year.