FASTEST GROWTH RECORDED IN 17 YEARS
Australia’s property markets appear to be at the start of a broad-based boom across all capital cities and regional markets spurred on by a combination of record-low mortgage rates, improving consumer confidence, federal and state government incentives and low levels of supply. CoreLogic recorded a monthly increase of 2.1% in home values across the country, the highest monthly increase in seventeen years in the national home value index.
Record breaking markets across the board
Not since August 2003 has such an increase been recorded. All markets showed strong growth rates, with Sydney, Melbourne and Hobart recorded the strongest growth. Sydney posted a 3% monthly increase in house values to reach a median value of $1,061,229 and record the highest result of all the capital cities, spurred by record auction clearance rates and high buyer demand. Melbourne recorded a strong 2.4% monthly increase to reach $829,509, spurred by more stock than the other cities as the market recovers from lock-down and pent-up demand from both vendors and buyers. Of the other capitals, Hobart recorded a monthly increase of 2.5% to reach $572,188; Canberra was up 2.2% to reach $797,421; Brisbane and Perth were up by 1.5% to reach $593,232 and $513,566 respectively; Darwin was up 1.3% to reach $508,410; and Adelaide was up 0.8% to reach $509,148.
In terms of quarterly increases, the Darwin market is currently growing at the fastest rate, with median house values increasing 7.5% in the three months to the end of February. Sydney and Melbourne also posted strong quarterly growth as they recovered from the Covid-19 induced market declines – with Sydney posting the third strongest quarterly result at 4.8% and Melbourne posting 4.2%. Hobart at 5.2% and Perth at 4.4% have been the other strong performers, with both cities rising strongly over the last three months. Brisbane recorded a 3.8% quarterly increase while Adelaide posted an increase of 3.1%. Finally, the Canberra market continues to show strong quarterly growth, with a 4.2 per cent rise over the three months to the end of February. With a median house price of $797,421, Canberra is the third most expensive market in the country after Sydney and Melbourne.
However, it must be noted that apartment markets across the country are performing much slower than the market for detached houses. House values have grown at around three times the rate of units. There are tentative signs that the unit market could be about to recover in some markets, with Sydney unit values recording the first month of growth since April last year and Melbourne unit values posting the first increase since late 2019. Sydney units recorded a monthly increase of 1.2% to reach a median value of $738,254, while Melbourne also posted an increase of 1.2% to reach a median value of $582,833. Hobart had the strongest increase in unit values, with an increase of 2.3% to reach a median value of $421,143.
Regional markets continue to outperform capitals
Meanwhile, the gap between regional markets and city markets narrowed in February. The figures do show a continuation of the trend for regional areas to outperform capital city markets, but the gap is much closer as values in capital city markets start to accelerate. Regional housing markets grew 2.1% over the month compared to 2.0% for capital city markets. However, the annual growth trend is significantly higher for regional markets, with the combined regional market index recording annual growth of 9.4% compared with just 2.6% for capital city markets.
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 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 23.4% cent lower than last February. Some cities have even tighter stock levels, with Darwin recording total inventory levels 40.2% lower than last February and Canberra recording total inventory levels 35.9% lower than last February. Melbourne is the only market where the total amount of listings is higher than last February, with total stock in Melbourne sitting 13.6% higher than this time last year.
However, most cities posted an increase in new listings during February 2021. Melbourne recorded the biggest increase, with an 80.5% uplift in new listings. Meanwhile, Perth showed a 37.9% uplift; Canberra registered an 18.4% uplift; Adelaide showed a 17% uplift; Sydney recorded an 8.6% uplift; and Brisbane a 6% uplift. Further, CoreLogic has recorded an increase of 19.5% in the number of CMA reports used by agents to prepare a property listing, suggesting that there will be a further surge in new listings in March.
What does this tell us about the market?
The results of CoreLogic’s national home value index for February indicates that a broad-based nationwide property boom driven by low finance rates, government stimulus and improving consumer confidence is now underway. The results are a remarkable turnaround from predictions just a year ago of a market crash. Firstly, this shows that predictions from experts of market crashes need to be treated with caution, and generally the worst-case scenarios do not eventuate. 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. Second, the result shows that the intention from both the federal and state governments to underpin property markets and ensure they didn’t collapse through targeted incentives has worked. Finally, the result is an indication that Australia’s economy as a whole has weathered the pandemic well.
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RBA KEEPS INTEREST RATES ON HOLD AT HISTORIC LOW 0.10 PER CENT AS PROPERTY BOOMS
Australia’s interest rates will remain at the historic low level of 0.10 per cent despite surging property prices and a recovering economy in the wake of COVID-19.
The Reserve Bank of Australia (RBA) met this afternoon, with the nation’s top economists deciding to hold their hand on adjusting the rate in line with their three-year forecast.
Last year marked a near-unheralded year for the RBA, which cut the nation’s cash rate three times in response to fears that COVID-19 restrictions would crush property prices.
The opposite is now occurring, with February 2021 signalling the biggest increase in the national house price in 17 years.
RBA Governor Philip Lowe remarked that today’s decision was made with property prices considered as a factor.
QUEENSLAND HOUSE PRICES ‘THROUGH THE ROOF’ AS INTERSTATE MIGRATION AT 20-YEAR HIG
Australian Bureau of Statistics (ABS) demographer Andrew Howe said over the last year Queensland had a net inflow of about 25,000 people.
“That’s the highest Queensland’s been for around 20 years,” he said.
“Although still not quite as high as the peak years for interstate migration to Queensland in the early 1990s.”
Provisional internal migration figures from the ABS showed Queensland had a net gain of 7,237 people in the September 2020 quarter.
The number of people arriving in Queensland from other states fell in comparison with the previous quarter.
HOW WILL JOBSEEKER CHANGES IMPACT THE PROPERTY MARKET?
This week, the Federal government announced a permanent increase to the JobSeeker base rate by $50 a fortnight, effective from 1 April, taking the total fortnightly rate to $615 from the current $565.70 figure, or $43.57 a day.
The $3.57 daily increase is lower than the current payment that includes the temporary $150 a fortnight ‘coronavirus supplement’, which is set to cease on March 31.
The JobSeeker coronavirus supplement was introduced in early 2020 in response to the COVID-19 pandemic for new and existing welfare recipients, set at an additional $275 per week, which virtually doubled payments for some recipients.
The recent $50 increase came under fire, with welfare recipients $250 worse off compared with what they were receiving at the onset of COVID-19.
CoreLogic’s Head of Research Eliza Owen said it’s important to acknowledge that the JobSeeker supplement has already been significantly reduced in recent months with no apparent negative impact on the housing market.