SOARING PROPERTY MARKET SEES AVERAGE FIRST HOME BUYER DEPOSIT SKYROCKET ABOVE $100,000
It was October 1988. Bob Hawke was Australia’s Prime Minister. The Hawthorn Hawks had just defeated the Melbourne Demons to win the VFL Premiership. World Expo ‘88 in Brisbane was drawing to a close. And Australia’s housing markets rose by 3.2 per cent. That is how long since Australia has experienced a monthly rise in the home value index of that magnitude. Until last month. The monthly home value index for March 2021 rose by 2.8 per cent – the highest increase in 32 years since October 1988. The strong growth conditions continue to be broad-based with all capital cities and regional markets rising by at least 1.4 per cent.
Record-breaking markets across the board
All markets showed strong growth rates, with Sydney and Canberra recorded the strongest growth. Sydney posted a massive 4.3 per cent monthly increase in house values to reach a median value of $1,112,671 and record the highest result of all the capital cities, spurred by record auction clearance rates often surpassing 90 per cent and extremely high buyer demand. Sydney house values have now surpassed the previous peak recorded in July 2017. Meanwhile, Canberra recorded the second-highest growth at 3.3 per cent, with house values reaching a median of $819,707 and edge closer to overtaking Melbourne’s mantle as the second most expensive city in Australia.
Of the other capitals, Melbourne recorded a strong 2.6 per cent monthly increase to reach $859,097, spurred by more stock than the other cities as the market recovers from lock-down and pent-up demand from both vendors and buyers. Melbourne house values have now surpassed the March 2020 peak.
Of the other capitals, Hobart recorded a monthly increase of 3 per cent to reach $584,974; Brisbane was up 2.6 per cent to reach $607,969; Darwin was up by 1.9% to reach $519,575, Perth was up by 1.8 per cent to reach $527,833, and Adelaide was up 0.8% to reach $518,692.
It is worth noting that the premium end of the housing market is leading the way, with the upper quartile of the market recording a 3.7 per cent lift in values compared with 1.6 per cent for the lower quartile.
In terms of quarterly increases, the Sydney market is currently outpacing all the other capital cities, with median house values increasing 8.2 per cent in the three months to the end of March. The second strongest growth over the quarter has been been the Hobart market at 7.3 per cent, followed by Darwin at 7 per cent and Canberra at 6.9 per cent. Melbourne continues to defy predictions that it would have a slow to negative close in the post-lock down environment, with house values growing by 5.6 per cent over the three months to the end of March, while Brisbane performed solidly at 5.3 per cent. Meanwhile, Adelaide and Perth both recorded quarterly growth of 3.5 per cent.
However, it must be noted that apartment markets across the country continue to perform much slower than the market for detached houses. Nationally, house values were 3 per cent higher for the month, whereas unit values were up by 1.9 per cent. Despite this, the unit market does appear to be recovering, with Sydney two consecutive months of growth in the unit market and the Melbourne unit has seen unit values consistently increasing since October last year. Sydney units recorded a monthly increase of 2.1 per cent to reach a median value of $755,360, while Melbourne posted an increase of 1.7 per cent to reach a median value of $593,121. Hobart had the strongest increase in unit values, with an increase of 4.9 per cent to reach a median value of $453,726.
Capital markets outperform regional markets
Meanwhile, for the first time in a year, the combined capital city housing markets outperformed the combined regional markets. Regional housing markets grew 2.5 per cent over the month compared to 2.8 per cent for capital city markets. However, the annual growth trend remains significantly higher for regional markets, with the combined regional market index recording annual growth of 11.4 per cent compared with just 4.8 per cent for capital city markets.
The only state where the regional market rose at a stronger rate than the capital city market was Victoria, where regional markets rose 2.6 per cent in March compared to 2.4 per cent in Melbourne.
The rise of regional centres continues to align with the exodus of people from the major centres – particularly Sydney and Melbourne. The exodus to the regions was already underway prior to the pandemic and is due to several reasons, including a desire for lifestyle changes, more affordable housing and the wish to escape the pollution and traffic of the major cities. The pandemic accelerated the trend with some people moving to regional centres due to 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. The trend towards more remote working also accelerated, further contributing to the exodus. These demographic trends were 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.
Inventory Levels remain 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. Total inventory levels are currently around 25.5 per cent lower than last March. The number of newly advertised homes has risen to above-average levels, with the number of new listings nationally sitting 8.1 per cent higher than this time last year. However, the reason for the low total number of listings is that buyer demand remains so high, resulting in rapid absorption rates. CoreLogic estimates that for every newly listed property, there are 1.1 properties sold. This is resulting in very low inventory levels across the nation.
What does this tell us about the market?
The results of CoreLogic’s national home value index for March indicates that a broad-based nationwide property boom driven by low finance rates, government stimulus and improving consumer confidence is accelerating. With the fastest monthly increase in 32 years, there is no doubt that the national housing market has recovered from the downturns recorded during the height of the pandemic. The nation’s property markets did experience a decline during the pandemic, but it was far more modest than the predictions, and the markets have recovered quickly. With every market outperforming predictions, it would appear that government efforts to stimulate the housing market during the pandemic have worked well and as a result, Australia is experiencing its first nationwide property boom since 2003.
If you want to capitalise on the property boom before it’s too late, request a specialised 1:1 strategy session with one of our Senior Property Coaches today.
RBA HOLDS RATES AS BANKS CONTINUE TO TWEAK
Australian banks continue to chop and change interest rates for fixed rate home loans, as the Reserve Bank of Australia maintains there will be no movement of the official cash rate from its record low for several more years.
RBA governor Philip Lowe today announced that the central bank’s board of directors saw no reason to change the official cash rate from its historic low of 0.1 per cent.
Dr Lowe also reiterated that the cash rate would likely not be increased until 2024 at the earliest, as while the economic recovery was under way and stronger than expected, unemployment remained high and wage growth was subdued.
QUEENSLAND A 'STRONG BET' FOR INVESTORS?
Queensland is likely to be the top destination for investors this year, as Sunshine Coast and Gold Coast record solid demand, according to the Real Estate Institute of Queensland (REIQ).
Antonia Mercorella, CEO of the REIQ, said Queensland’s property market was able to remain “extremely stable” over the past year. In fact, prices in the state have increased by 6.1% over the final three months of 2020.
“Between record-low interest rates, low stock availability for sale, improvements in consumer sentiment and Queensland’s unbeatable lifestyle, it’s no surprise we’ve also seen broader increases in values month on month in 2021,” she said. “Queensland is shaping up to be a strong bet for investors, with properties from the Gold Coast to the Sunshine Coast selling fast and on a solid foundation for capital growth in 2021.”
ONE IN FIVE FIRST-TIME BUYERS CONSIDERING CROSSING THE BORDER TO ENTER PROPERTY MARKET
First-time homebuyers are increasingly looking outside their own back yards in an attempt to get a foothold in the property market, with many considering purchasing interstate, according to new research from comparison site Finder.
Data from Finder’s First Home Buyers Report 2021, which surveyed 1028 first-home buyers, found 20 per cent of prospective homeowners were searching for their first property in a different state to the one they currently reside in.
The figures mean there are an estimated 2362 Australians a month who are prepared to buy in another state in order to enter the property market.
According to the survey, first-home buyers from New South Wales were the most likely to consider moving interstate, with 24 per cent saying they would consider buying a property in another state.
By comparison, 19 per cent of Queenslanders and 17 per cent of Victorians surveyed said they would contemplate moving interstate to secure their first home.
Finder’s home loans expert Sarah Megginson said many prospective buyers were being lured by the prospect of cheaper property across state borders.