Home prices hit record highs in 46 Australian regions: CommSec's Ryan Felsman

Home prices hit record highs in 46 Australian regions: CommSec's Ryan Felsman
Home prices hit record highs in 46 Australian regions: CommSec's Ryan Felsman

EXPERT INSIGHT

The Aussie housing market is buoyant as the lifestyle stampede from the big cities to regional areas continues during the pandemic. Home prices advanced at the beginning of 2021, supported by record-low mortgage rates, the HomeBuilder grant scheme, the improving labour market, low advertised housing inventory and a pick up in home sales. In fact, CoreLogic estimates that “the number of national home sales over the past three months was 23.9 per cent higher than the equivalent three month period from a year ago.” The lift in sales volumes is consistent with an almost 50 per cent surge in owner-occupier housing loan approvals over the six months to November 2020. And CoreLogic preliminary national auction clearance rates hit 81.1 per cent last weekend.

Home prices remain divergent across Australia. The smaller and relatively ‘Covid-19 free’ housing markets of Darwin (+2.3 per cent), Hobart (+1.6 per cent), Perth (+1.6 per cent) and Canberra (+1.2 per cent) outperformed big cities: Sydney and Melbourne (both +0.4 per cent) in January. 

But it’s regional Australian housing markets – benefiting from remote working arrangements, internal migration, closed borders and better affordability – that are going gangbusters during the pandemic. Regional home prices climbed by 1.58 per cent in January after December’s 1.63 per cent gain – the biggest lift in 17 years. Regional home prices surged 7.9 per cent in the year to January – the strongest annual growth rate in 16 years. CoreLogic data also shows that in 46 of the 88 SA4 regions, home prices were at record highs to begin 2021.

Australia’s manufacturing sector is expanding at the fastest pace in over four years with new order inflows hitting 4-year highs. In fact AiGroup reported that Aussie factories are benefitting from “disruptions to global supply chains,” which “have led more customers to purchase from Australian manufacturers.” And “demand from customers in the agriculture, mining, medical and home building sectors” has been particularly strong as Australia’s post-pandemic recovery gains momentum. 

What do the figures show?

The CoreLogic Home Value Index of national home prices rose by 0.9 per cent in January to be 3.0 per cent higher over the year. 

In capital cities, prices rose by 0.7 per cent to be up 1.7 per cent over the year. House prices climbed 0.9 per cent and apartment prices rose by 0.1 per cent. House prices were up 2.4 per cent on a year ago, but prices of apartments decreased by 0.1 per cent.

In regional areas, home prices jumped 1.6 per cent with house prices up 1.7 per cent and apartment prices up by 1.2 per cent. Regional home prices were up 7.9 per cent on the year with houses lifting 8.2 per cent and apartments up 6.2 per cent.  

The average Australian capital city house price (median price) in January was $709,017 and the average unit price was $574,565.

Home prices were higher in all eight capital cities in January: Sydney (+0.4 per cent); Melbourne (+0.4 per cent); Brisbane (+0.9 per cent); Adelaide (+0.9 per cent); Perth (+1.6 per cent); Hobart (+1.6 per cent); Darwin (+2.3 per cent); Canberra (+1.2 per cent).

Home prices were higher than a year ago in seven of the eight capital cities in January: Sydney (+2.0 per cent); Melbourne (-2.1 per cent); Brisbane (+4.0 per cent); Adelaide (+6.5 per cent); Perth (+3.4 per cent); Hobart (+6.8 per cent); Darwin (+11.4 per cent); Canberra (+8.5 per cent).

Total returns on national dwellings rose by 6.6 per cent in the year to January with houses up 7.2 per cent and units up by 4.8 per cent on a year earlier. In contrast, the S&P/ASX All Ordinaries Accumulation Index fell by 0.7 per cent over the year to January. 

Home prices hit record highs in 46 Australian regions: CommSec's Ryan Felsman

What are the implications for investors?

Australia’s property market is strong, driven by a pandemic-led recovery in house prices across regional Australia and smaller capital cities. But it’s not all good news with annual apartment prices turning negative in January amid oversupply and reduced demand for inner city living in the pandemic.

More modest gains in home prices are being recorded in Sydney and Melbourne as both contend with disruptions from virus flare ups, higher pandemic job losses, border closures, slowing population growth and a weaker unit market. In fact, prices fell slightly in Sydney – City and Inner South (-0.3 per cent), Sydney – Inner West (-0.1 per cent) and Melbourne – Inner East (-0.03 per cent) in January.

And the rental market is incredibly weak in Australia’s two most populous cities with rents down 7.8 per cent in Melbourne and 5.6 per cent in Sydney over the year to January. The recovery in inner city rentals remains highly dependent on employer return-to-work directives, continued virus suppression and the job market recovery. But the upside is that rental affordability has improved for younger local students returning to university campuses in the next month. 

Commonwealth Bank (CBA) Group economists expect national home prices to lift by around 8.0 per cent in 2021.  However disparities within the housing market are expected to linger with stronger demand for detached housing relative to units and townhouses.  

Ryan Felsman is a Senior Economist at CommSec

Tags: 
Record Home Prices Housing Market

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