Record-high house prices expected to keep rising
House prices have been predicted to continue rising even after hitting a record-high across all markets in January, as the Australian economy continues its rapid recovery.
CoreLogic’s monthly look at house prices showed every capital city and rest-of-state region recorded an increase in median values over the month, with its national index rising by 0.9 per cent.
Darwin was again the best performing capital with a 2.3 per cent rise, followed by Perth and Hobart at 1.6 per cent and Canberra at 1.2 per cent, while Brisbane and Adelaide home values rose by 0.9 per cent.
Sydney and Melbourne’s median house prices were up by 0.4 per cent for January, CoreLogic said.
CoreLogic research director Tim Lawless said he expected prices would continue to rise in the coming months, even as the national median house price hit a record $583,157 in January.
Mr Lawless said labour markets were continuing to improve despite the phase-out of JobKeeper, mortgage repayment deferrals had fallen to just 2.4 per cent all home loans and buyer activity remained well above average, even with no overseas migration.
“With housing activity continuing to rise at above average levels while listing numbers remain well below average, the natural consequence is upwards pressure on housing prices,” Mr Lawless said.
“Advertised supply levels are low while demand is strong.
“This is a seller’s market, but for some reason we are still seeing below normal vendor numbers across most markets.
“With sentiment rising and selling conditions favouring the vendor, it is reasonable to expect new listing numbers will rise as the year progresses, which may help to temper housing market conditions.”
House prices and unit values continued to diverge in January, continuing a trend that started early in the pandemic.
Nationally, house prices have risen by 3.5 per cent over the past six months, while unit values have remained steady, while in the past three months, every capital city has recorded a stronger result for houses over units.
“Demand for units has diminished through COVID-19 amid record low levels of investor participation and changing living preferences,” Mr Lawless said.
“At the same time, supply levels are heightened in some precincts. While demand and supply remain imbalanced we are likely to see units continue to underperform relative to detached housing markets.”
Regional markets are also continuing to outperform capital cities, continuing the other prevalent pandemic trend.
CoreLogic’s combined regional index was up 1.6 per cent in January, compared to a capital city rise of 0.7 per cent.
Since the start of the pandemic in March last year, regional housing values have increased by 6.5 per cent, while capital city housing values are down 0.2 per cent over that time frame.
Mr Lawless said the divergence between regional and capital city values was more substantial in New South Wales and Victoria than the other states.
“Internal migration data shows more people are leaving Sydney and Melbourne for regional areas, resulting in a transition of activity from the metro regions to the outer fringe and regional markets,” he said.
“This demographic trend is further compounded by the demand shock of stalled overseas migration.
“As Melbourne and Sydney historically receive the vast majority of overseas migrants, these metro areas have been the hardest hit by this demand shock.
“Better housing affordability, an opportunity for a lifestyle upgrade and lower density housing options are other factors that might be contributing to this trend, along with the new found popularity of remote working arrangements.”
In rental markets, early signs are emerging that weakness in the unit sector is starting to level out, the research showed.
While unit rents in Melbourne and Sydney are down 7.8 per cent and 5.6 per cent, respectively, over the past 12 months, the rate of decline is easing.
Sydney unit rents posted their first month-on-month rise in January since March last year, while Melbourne unit rents were steady.
Unit rents in Brisbane and Hobart are also starting to stabilise.
Perth and Darwin continue to stand out with the largest rental increases, due to extremely tight rental supply at a time of rising demand.
Article by API Journalist