Wednesday, December 8, 2021

Property Prices Grow at the Fastest Rate Since 2004

Australian house prices officially grew by 13.5% over the past 12 months, making it the most significant annual gain we’ve seen since 2004.

Once again, houses have strongly outperformed units, with Sydney, Hobart, Darwin, and Canberra the standout performers over the last financial year, seeing gains of nearly 20% across the board, according to the latest data from CoreLogic.

In June, dwelling values increased in all the major capital cities and regional Australia; however, certain areas are starting to see momentum slowing down. Each capital city saw an uplift in dwelling values, ranging from a 3.0% rise in Hobart to a more subdued 0.2% increase in Perth.

Change in Dwelling Values - June 2021

Source: CoreLogic

It continues to be the top-end of the housing market, particularly in places like Sydney and Melbourne, leading to the uptrend in price appreciation. Notably, the bottom end of the market, generally built around the first home buyer market, has clearly started to ease off.

Much of the gains from this end of the market came on the back of the numerous Government incentives, which effectively bought demand forward.

The record low cost of finance continues to be the main driver of the upper end of the market, along with the fact that supply levels are still very tight.

New Listings & Total Listings - June 2021

Source: CoreLogic

Head of Research at CoreLogic, Elize Owen, notes that supply levels are still well below historical levels.

“The latest listings count from CoreLogic indicates that in the 28 days to June 27th, total advertised stock remained 24.4% below the five-year average. This dynamic of strong consumer demand, and low housing supply, continues to create some urgency among buyers.”

Perth and Darwin Lagging

The loss of momentum is seen most clearly in the two mining states of WA and the Northern Territory.

For Perth dwellings, the monthly growth rate in values had averaged 1.4% between January and May 2021 but fell to 0.2% through June. Across Darwin, the monthly growth rate in dwelling values averaged 2.1% between January and May but was just 0.8% through June.

“The key to understanding the softer performance in these resource-based markets may be a slightly different supply-demand dynamic compared to the other capital cities and regions,” says Ms Owen.

“CoreLogic monitors a ‘sales to new listings ratio, which divides the monthly volume of settled sales by new listings brought to market. The sales to new listings ratio have averaged 1.1 across Darwin and Perth for the past three months. While the implication is that there are 1.1 sales for each new listing, which could be enough to elicit further growth in dwelling values, these are the lowest sales to new listings results of the capital city markets.

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