House prices rise in all but one capital city

A slight decline in Melbourne was the only negative movement in Australian house prices in October, with property markets across the nation shifting firmly into recovery mode.

Melbourne’s median house price fall of 0.2 per cent was the smallest monthly decline in values since the pandemic began, while Adelaide and Darwin were the biggest gainers over the month, with both cities recording a 1.2 per cent rise, according to data from CoreLogic.

Sydney’s median nudged up 0.1 per cent, Hobart recorded a 1 per cent gain, while Brisbane and Perth recorded increases of 0.5 per cent and 0.6 per cent, respectively.

The increases pushed Brisbane, Adelaide, Hobart and Canberra housing values to new record median house price highs.

CoreLogic head of research Tim Lawless said he expected Melbourne would likely follow the other capital cities into positive territory in November, as new property listings surge and clearance rates rise following the easing of Stage 4 lockdown restrictions in Victoria.

Overall, however, Mr Lawless said the data indicated early evidence of a divergence between house and unit price performance.

“The rise in capital city housing values over the month was entirely attributable to a 0.4 power cent lift in house values, which offset the 0.2 per cent fall in unit values,” Mr Lawless said.

“Through the COVID period so far, unit values have actually shown a smaller decline in values than houses, but this is likely to change.

“Almost two thirds of Australian units are rented, and rental conditions have weakened, especially in the key inner city precincts of Melbourne and Sydney.

“These areas have a higher concentration of unit stock, and historic exposure to demand from overseas migration.

“Low levels of investment activity, relatively high supply of unit stock in inner cities and international border closures are key factors that imply units will under-perform houses over the medium term.”

Mr Lawless said rising home values across Australia followed improvements in consumer confidence over recent months, as well as the spending-heavy federal budget.

However, while confidence is up, listings remain near record lows, with buyer demand likely to exceed advertised supply levels.

Mr Lawless said it was clear that markets were responding to the stimulus of low interest rates and improved sentiment, with activity on the rise and a possible rate cut on the horizon.

“The recent housing market growth trajectory comes amidst the winding down of fiscal support programs such as JobKeeper and coinciding with the majority of home loan repayment deferrals expiring,” he said.

“So far, this period of uncertainty hasn’t impacted on housing market performance, however it will be important to monitor changes in inventory levels and vendor metrics at geographically granular level, watching for any sign of distressed stock.

Across rental markets, Perth and Darwin stand out among capital cities with low vacancy rates and rising average rents.

Perth house rents were up 4.9 per cent in October, while Darwin’s average rent increased by 4.4 per cent. For units, Perth rents were up 2.5 per cent, while Darwin’s rose by 3.3 per cent.

Adelaide house rents were up 1.1 per cent while unit rents dropped 0.1 per cent, while in Brisbane house rents were up 0.6 per cent while unit rents fell by 1.7 per cent.

Hobart was Australia’s worst rental market performer in October, with house rents down 4.3 per cent and average unit rents falling 6.1 per cent.

Sydney and Melbourne’s house rents fell by 1 per cent and 1.1 per cent, respectively, while unit rents plunged by 5.8 per cent in the harbour city and 6.6 per cent in the Victorian capital.

“We remain cautious about inner-city high rise unit precincts, especially in Melbourne and Sydney, where rental conditions have deteriorated sharply and supply levels remain high,” Mr Lawless said.

“Falling rents and occupancy rates are likely to weigh heavily on investor balance sheets at a time when purchasing demand is likely to be low.

“Sellers in these areas looking for a quick sale could be facing significant pricing discounts until rental markets and supply additions stabilise.”