Growth rate may have peaked, but house price rises to continue
House price growth slowed as new listings rose strongly in April, with mounting indications that the rate of gains in the housing market may have already peaked. Strong buyer demand, however, is likely to support steady capital growth for the rest of the year.
House price growth slowed as new listings rose strongly in April, with mounting indications that the housing market may have already peaked. Strong buyer demand, however, is likely to support steady capital growth for the rest of the year.
CoreLogic said its national home value index rose 1.8 per cent in April, easing off from its 32-year high of 2.8 per cent recorded in March.
More than 40,000 new listings were added to the market in the four weeks ending April 25, with those additions coming in around 14 per cent above the five-year average.
CoreLogic head of research Tim Lawless said strong demand, however, was keeping overall property advertisements low, with the total number of listings available sitting around 25 per cent below the five-year average.
“Such low total listing numbers, at a time when new listings are above average, reflects the strength of buyer demand, fuelling the current rapid rate of absorption,” Mr Lawless said.
“Prospective vendors are likely becoming more motivated to test the market thanks to such strong selling conditions as well as housing prices pushing to record highs in most areas.”
Further evidence of the strength of the market, Mr Lawless said, was auction clearance rates, which sat in the upper 70 per cent range throughout April, as well as falls in median selling times and vendor discounts.
Australia’s median time on market fell to a record low of 26 days in April, with median discounts hitting 2.7 per cent, also an all-time low.
Darwin was the top performing city for the month, racking up a 2.7 per cent gain, followed by Sydney at 2.4 per cent.
Canberra’s median price rose 1.9 per cent, CoreLogic said, while Brisbane’s median was up 1.7 per cent and Melbourne’s 1.3 per cent.
Perth recorded the slowest rate of growth of any capital city at 0.8 per cent.
Mr Lawless said the slowdown in price growth was not surprising, in the context of the rapid increases recorded in the past six months alongside subdued wages growth.
“With housing prices rising faster than incomes, it’s likely price sensitive sectors of the market, such as first home buyers and lower income households, are finding it harder to save for a deposit and transactional costs,” he said.
“There is already some evidence of fewer first homebuyers in the market, with the Australian Bureau of Statistics reporting a 4 per cent fall in the value of first homebuyer home loans through February, the first drop since May last year.”
Houses continued to outperform units over the month, with detached home values now up 8.6 per cent since the start of the year, compared to 4.3 per cent growth in unit prices.
This divergence was illustrated most strongly in Sydney, where house prices were up 11.2 per cent in the first four months of 2021, while unit values rose by 4.6 per cent.
“A preference shift away from higher density housing during a global pandemic is understandable, however a rise in flexible working arrangements also seems to be supporting greater demand for houses around the outer-fringes of capital cities,” Mr Lawless said.
“Relatively weak investor activity, compounded by a supply overhang in some high-rise precincts, is also dampening price growth in unit markets.”
Rental markets experienced similar performance, with unit rents down 7.6 per cent in Melbourne over the past 12 months, while house rents have been largely steady, up 1.2 per cent.
Perth and Darwin remained the strongest performers in terms of rental growth.
Rental yields continue to be compressed, with home values rising at a faster pace than rents.
Nationally, rental yields have fallen to a record low of 3.5 per cent, with the lower yield trend most evident in Sydney, with gross yields averaging just 2.69 per cent.
Looking forward, Mr Lawless said he expected house prices to continue to rise for the rest of the year and into 2020, but in a more subdued fashion than in the first few months of this year.
He said demand would be supported by record low interest rates and ongoing high levels in consumer confidence, while the risks associated with the wind-back of government support and the expiry of mortgage deferrals had become less significant.