Property prices across Australia continue to surge, with the latest house price data showing another big jump in February. According to the latest data from CoreLogic, house prices rose by 2.1% across the nation, marking the most significant jump we’ve seen since 2003. In February, Sydney, Melbourne, and Hobart were the most important performed capital cities, rising by 2.5%, 2.1%, and 2.5%, respectively. At the same time, all other capital cities recorded gains upward of 0.7% for the month. Over the last quarter, house prices nationwide have risen by 4.0%.
Regional areas also continue to see substantial gains in price, jumping 2.1% in February and 5.4% over the quarter. Since the onset of COVID in March 2020, regional house prices have seen tremendous interest and are 9.4% higher across the country. The last time house prices rose at this rate was in 2009, and there are some critical parallels to what we’re seeing in the market right now. After the GFC, the Federal Government released a host of stimulus measures io boost demand for property. During that time, house prices rose by around the same amount as was introduced through the stimulus measures. Since COVID began, interest rates have fallen to a record low level while state and federal government incentives have been rolled out, including the Building Bonus and stamp duty relief.
Graph of the Cash Rate Target
The Australian market also sees a widespread shortage of stock, with listings continuing to sit at shallow levels. Many Australians choose not to sell, and those properties put on the market are finding buyers as many ex-pats decide to return home. In contrast, others look to take advantage of the low-interest rate environment. Total Listings in 2021 sit at around 140,000 compared to 180,000 last year. We’ve seen periods where complete listings have been as high as 240,000 across the country in the past five years, reflecting just how tight stock levels are in the current market.
According to CoreLogic, there is evidence to suggest that listings could be about to rise, given how active real estate agents have been in recent months. Rental markets were also seeing renewed levels of interest in 2021. Perth and Darwin are experiencing meager rental vacancy rates, bought about by a lack of investor activity over the past five years. Now that both cities are seeing healthy levels of interstate migration, both are likely to see further pressure on rental markets in the months ahead. Meanwhile, the unit rental market in Sydney and Melbourne is also starting to turn around as confidence returns, with lockdowns continuing to ease in Australia’s two largest cities.
CoreLogic states, ‘Australia’s housing market is now well entrenched in one of the strongest growth phases on record’. CoreLogic believes thatseveral conditions continuee to underpin the market strength, including the low-interest-rate environment, economic conditions rapidly improving, and the ongoing supply shortage in the form of low listings. They caution that even though this is an intense growth phase, there could still be some headwinds. The federal government will continue to taper off its financial support in the months ahead, while the home loan deferral arrangements will also end.
For the time being, CoreLogic believes, ‘housing price momentum looks to be skewed towards the upside, with the tailwinds of low rates, improving economic conditions and consumer confidence, low supply and high consumer demand likely to outweigh the headwinds associated with the coming wind-down of fiscal support.’
