PROPERTY PRICES RISE ABOVE PRE-PANDEMIC LEVELS
Property values continue to increase across Australia in the wake of COVID-19, with all markets across Australia now recording median values that are above pre-pandemic levels. Figures from CoreLogic show that every capital city recorded an increase in January, from a modest 0.4 per cent increase for Sydney and Melbourne up to a 2.3 per cent rise in Darwin.
The Darwin market is currently growing at the fastest rate, with median house values increasing 6.6 per cent in the three months to the end of January to reach $516,050. Hobart and Adelaide have been the other strong performers, with neither city experiencing a decline during the pandemic, and both rising strongly over the last three months to end the January. Hobart rose 4.4 per cent to reach a median house value of $562,083, while Adelaide reached $509,978. Brisbane house values both dipped during the pandemic, but have risen strongly since to reach $583,902, while Perth has likewise recovered from a dip to reach $506,083. Sydney performed more modestly with a 2.4 per cent rise in house values over the three months to the end of January, while Melbourne is in recovery mode from a near five-month-long lockdown to record a 2.4 per cent rise over the past three to $821,904. Finally, the Canberra market performed strongly through 2020, with a 4.2 per cent rise over the three months to the end of January to $770,232, which makes Canberra the third most expensive market in the country after Sydney and Melbourne.
January Market Statistics
Property Prices Since Pandemic Started
Regions outperforming capitals on the back of record internal exodus from Sydney & Melbourne.
The figures also show a continuation of the trend for regional areas to outperform capital city markets. Regional housing values grew at more than twice the rate of capital city markets, with CoreLogic’s combined regional index showing an increase of 1.6 per cent over January compared with a 0.7 per cent increase for the combined capital city markets.
Regional Victoria experienced a monthly increase of 1.6 per cent and regional New South Wales rose by 1.5 per cent compared with a more modest 0.4 per cent gain in house values in Sydney and Melbourne.
The continued rise in regional housing values comes on the heels of new data released by the Australian Bureau of Statistics (ABS), which shows that capital cities experienced a net loss of 11,200 people in the September quarter, which is the largest quarterly net loss of population since records began in 2001. The net loss was almost entirely experienced in Sydney and Melbourne. Sydney experienced the single biggest loss of people, with a net loss of 7,800 people, continuing a trend of residents moving to Queensland or to regional centres that began well before the pandemic.
Meanwhile, Melbourne saw an eight-fold increase in the number of people leaving compared to before the pandemic, with a loss of 7,400 people. During the September quarter, Melbourne was in the midst of the longest lockdown of any city in Australia, and many of the residents who left may have been motivated by the desire to escape the lockdown. The largest proportion of those leaving Melbourne left for Queensland. As Melbourne was locked down with closed borders during the September quarter, the city did not gain any people from any other state or territory.
Of the other capital cities, Brisbane was the biggest beneficiary of internal migration, while Perth also saw an increase in internal migration. The population of the other capital cities remained stable during the quarter.
Quarterly Net Internal Migration, Greater Capital Cities Combined
The exodus of people from Sydney and Melbourne was due to several reasons, including a desire to escape the lockdown and the perception that the risk of becoming infected with COVID-19 was highest in the two largest cities; plus a desire for lifestyle changes, more affordable housing and the wish to escape the pollution and traffic of the major cities. A trend towards more remote working also contributed to the exodus.
This demographic trend was exacerbated in Sydney and Melbourne by the continued closure of Australia’s borders and stalled overseas migration, as these two cities receive the majority of overseas migrants.
However, some demographers don’t believe the trend towards moving to regional areas will continue. ANU demographer Liz Allen expects it to be a short-lived trend and believes that some people will shift back to the cities when they realise the infrastructure of regional areas is woefully inadequate. Further, the trend to remote working could be stymied as employers start asking their workers to come back to the office.
Inventory Levels well below the five-year average
With demand for new housing strong across all capital city and regional markets, there continues to be a lack of new stock listed on the markets. Inventory levels are currently around 3.3 per cent lower than last January and 13.3 per cent below the five-year average. The exceptions are Perth, which saw new listings up by 2.2 per cent over last January and Melbourne, which saw new listings up by 20.8 per cent over last January.
Melbourne vendors are still playing catch up from the lockdown and the higher volume of new listings in Melbourne are likely to be a backlog of properties that were originally intended to be listed during 2020. One other reason for the additional listings in Melbourne is an increase in the number of apartments listed for sale. Unit listings are 17.5 per cent higher than this time last year whereas house listings are at about the same level. This increased supply of new apartment listings is helping to suppress prices across Melbourne’s apartment market. Growth in the median value of apartments is slow in Melbourne, with apartments recording a monthly increase of 0.1 per cent and a quarterly increase of 1.4 per cent to reach $577,206, well below the monthly and quarterly increases for Melbourne’s detached housing market.
However, it must be noted that apartment markets across the country are performing much slower than the market for detached houses, with the exception of Perth which saw a 3 per cent quarterly increase in median prices to $369,531 and Darwin with recorded a 4.2 per cent quarterly increase to $291,475.
Property Market Listing Numbers
Summary
The results of CoreLogic’s national home value index for January confirms that the property markets have recovered from the pandemic and bode well for a continued boom in 2021.
Regional markets are likely to continue outperforming capital city markets this year, especially given that internal migration is at record levels and Australia’s borders will remain closed to migrants for the foreseeable future.
The most significant risk to a continuing boom in housing markets across Australia in 2021 will be significant outbreaks of COVID-19 causing further lockdowns and stalling the market.
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WEEKLY ARTICLES
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Australia’s “ferocious” property market is forecast to soar by up to 10 per cent this year, following new data that shows house prices and new loan commitments have hit record highs.
NAB group chief economist Alan Oster told Domain he expected an increase in property prices of 10 per cent in most capitals, excluding Sydney and Melbourne, which would rise between 7 per cent and 7.5 per cent.
Commonwealth Bank head of Australian economics Gareth Aird has predicted a 9 per cent rise in house prices and 5 per cent for units.
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At the same time, a separate report showed the construction sector is enjoying its best performance in over three years.
During an address to the National Press Club on Wednesday, Dr Lowe was asked whether he was worried about the rise in house prices and asset prices more generally.
“At the moment, not especially so,” Dr Lowe replied.
“It’s possible that housing prices will rise further.”
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Real Estate Institute of Australia president Adrian Kelly said 2020’s price growth was across most of the nation, both in terms of sales and rental returns.
The buoyancy of the market during such a tough year had surprised everyone, Mr Kelly said, tipping a 10-15 per cent further increase in values in 2021 across most regions, assuming the virus is kept under control.
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New figures have revealed there’s no significant shortage of property listings in Australia’s capital cities, despite many real estate and buyer agents claiming a lack of stock in some capital cities is contributing to fast-rising prices.
Instead, it’s the sheer number of buyers in the market right now – thanks to historic low interest rates – that’s making buyer conditions so competitive.
Data released by SQM Research on Tuesday found new property listings were up 4.3 per cent nationally over January, with most cities recording year-on-year rises.
RECORD-HIGH POSITIVITY IN PROPERTY MARKET
Positive property market sentiment has reached a new high, according to new research from ME Bank.
According to the ME Quarterly Property Sentiment Report, property sentiment increased 11 percentage points between January and December, hitting the highest peak since the report began (in 2019).
The report is based on the findings of a survey of 1,000 Australians, which was conducted by Pure Profile in January 2021.
It found that 49 per cent of respondents felt positive about the property market, up from 38 per cent in December 2020, and 4 percentage points higher than the previous high of 44 per cent (set in mid-2020). Similarly, negative sentiment was at a new low of 15 per cent.