Momentum continued to build across Australian housing markets last month, as values rise at the fastest rate in seventeen years.
Our national index showed housing values surged 2.1% higher in February, which was the largest month-on-month rise since August 2003.
Spurred on by a combination of record-low mortgage rates, improving economic conditions, government incentives and low advertised supply levels Australia’s housing market is in the midst of a broad-based boom.
A synchronized growth phase like this hasn’t happened in Australia for more than a decade.
The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-global financial crisis stimulus fueled buyer demand.
Sydney and Melbourne were among the strongest performing markets, recording a 2.5% and 2.1% lift in home values respectively over the month, as Australia’s two largest cities caught up from a weaker performance through 2020.
The quarterly trend, however, is still favoring the smaller cities; Darwin housing values rose by 5.5% over the past three months, Hobart values rose by 4.8% and Perth was up 4.2%.
Whether this newfound growth in Sydney and Melbourne can be sustained is unclear.
Both cities are still recording values below their earlier peaks, however, at this current rate of appreciation, it won’t be long before Australia’s two most expensive capital city markets are moving through new record highs.
With household incomes expected to remain subdued and stimulus winding down, it’s likely affordability will once again become a challenge in these cities.
Regional markets have continued to show a higher rate of capital gain relative to the capital cities, however, the performance gap has narrowed compared with the earlier phase of the growth cycle.
Regional areas generally recorded less of a decline in housing values through the worst of the COVID period last year, while also showing an earlier and stronger growth trend through the second half of last year.
This regional preference is reflected in the regionals index is 9.4% higher while the combined capital cities index is up a much smaller 2.6%.
A housing market trend that has persisted through the COVID period to-date is the weaker performance of unit markets relative to detached housing.
Across CoreLogic’s combined capitals index, house values have recorded a growth rate more than three times higher than that of units.
There are some tentative signs that the trend could become less obvious, with Sydney unit values recording their first month of growth since April last year and Melbourne unit values recording their largest gain since late 2019.
One of the factors driving housing prices higher is low advertised supply levels.
CoreLogic’s most recent measure of total listing numbers continues to see advertised supply significantly below that of recent years.
The number of properties advertised for sale nationally remained 25.3% below 2020 levels over the 28 ending February 28th.
Whilst available supply remains at historically low levels, the quarterly number of home sales is estimated to be up 35.3% on 2020 levels, with regional dwelling sales 40.6% higher compared with a 32.0% lift in capital city sales.
Housing inventory is around record lows for this time of the year and buyer demand is well above average.
These conditions favor sellers and buyers are likely confronting a sense of FOMO which could limit their ability to negotiate.
Vendor discounting rates were estimated at a record low of 2.6% in February, and auction clearance rates have been consistently up in the high 70% to low 80% range, which is well above average.
from Property UpdateProperty Update https://propertyupdate.com.au/national-housing-market-update-australia/
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