Strong growth phase continues for house prices

Australian house prices rose at their fastest rate in nearly two decades in February, with 2.1 per cent growth for the month the biggest monthly change since August 2003.

CoreLogic’s latest look at house prices showed home values rose across all capital city and rest of state regions, with low interest rates, an improved economy, low supply and government incentives all contributing to the growth.

Sydney and Hobart led the nation at 2.5 per cent growth, followed by Melbourne at 2.1 per cent.

Perth and Brisbane’s median house prices rose 1.5 per cent in February, while there was a 1.9 per cent rise in Canberra.

CoreLogic research director Tim Lawless said it was unclear whether the rebound in Sydney and Melbourne could be sustained.

“Both cities are still recording values below their earlier peaks, however at this current rate of appreciation it won’t be long before Australia’s two most expensive capital city markets are moving through new record highs,” Mr Lawless said.

“With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge in these cities.”

Once again there was a divergence in the performance of detached houses and units, with houses up 4.4 per cent over the past three months, and units rising just 1.4 per cent for the quarter.

However, Sydney unit values recorded their first month of growth since April, while Melbourne units recorded their largest gain since late 2019.

CoreLogic said the number of properties available for sale was one of the main driving factors behind the growth, with the number of properties available for sale nationally 26.2 per cent below 2020 levels for the 28 days to February 21.

At the same time, the number of transactions continues to trend higher, sitting around 35.3 per cent higher than 2020 levels, and regional dwelling sales up 40.6 per cent on last year.

“Housing inventory is around record lows for this time of the year and buyer demand iswell above average,” Mr Lawless said.

“These conditions favour sellers. Buyers are likely confronting a sense of FOMO which limits their ability to negotiate vendor discounting rates were estimated at a record low of 2.6 per cent in February, and auction clearance rates have consistently been in the high 70 per cent to low 80 per cent, which is well above average.”

CoreLogic’s data showed there could be a substantial lift in listings in March, with traffic on its real estate platform indicating agents are becoming more active.

“Although new listings are likely to track higher over coming months, if buyer demand continues to lift it’s likely overall advertised stock levels will remain low,” Mr Lawless said.

“Serious buyers would be well advised to have their financing pre-approved and be ready to act fast in order to secure a property under such tight supply conditions.”

In rental markets, conditions continue to remain extremely tight in Perth and Darwin, with annual rental growth in excess of 10 per cent, while unit markets in Sydney and Melbourne remain challenging for landlords, with yearly rents down 5.3 per cent in Sydney and 8 per cent in Melbourne.

Those markets appear to be turning however, with Sydney’s rental index for units recording two consecutive months of slight rises, while Melbourne unit rents ended a nine-month skid with a slight rise in February.

Mr Lawless said overall, Australia’s housing markets were well entrenched in one of the strongest growth phases on record.

“For housing values and activity to be surging during a global pandemic seems counter intuitive, however the factors driving this growth are significant and diverse,” he said.