CoreLogic’s September Home Value Index reveals an alarming statistic; average home values are rising by $1,990 per week (or $103,400 per annum), taking Australian housing values 18.4% higher than a year ago.
By comparison, wages are rising at just 1.7% per annum on average. This is the fastest annual pace of growth in housing values since 1989.
Through the late 1980’s, the annual pace of national home value appreciation was as high as 31%, so the market isn’t quite in unprecedented territory. The annual growth rate at the moment is trending higher, in fact, it is 3.6 times higher than the thirty-year average rate of annual growth.
Houses still beating apartments for growth
However, the performance gap is finally beginning to narrow. Throughout the first quarter, capital city house values were rising approximately 1.1% faster than units each month. By August the average performance gap reduced to 0.7%. The convergence of growth in house values and unit values is thought to be another demonstration of affordability becoming more challenging.
Monthly change in capital city home values
What is the impact of lockdowns?
Australian housing values have continued to record a broad-based rise despite the disruption from lockdowns. Dwelling values rose 1.5% in August; a rate of growth that is still well above average, but the lowest monthly rise since January.
Both advertised supply and housing demand have been negatively affected over recent months.
In early May, newly advertised properties were tracking 19.7% above the five-year average, however due to both lockdowns and seasonal factors, the number of new listings through August dropped to -5.8% below the five-year average and total active listings were -29.4% below average.
The estimated number of home sales has also been affected, dropping by -9.0% nationally over the three months ending August when compared to the previous three-month period. Despite the fall in sales, however, housing market activity remains well above average levels.
Rate of price growth peaked in March
The latest data provides further confirmation that the rate of price growth is moderating after moving through a peak in March of this year.
At that time, national home values had risen 2.8% in a month, led by Sydney where dwelling values were up 3.7%. The slowing rate of growth probably has more to do with worsening affordability constraints than ongoing lockdowns.
Although there has recently been a trend towards fewer buyers, the past three months has seen the number of home sales remain 30% above the five-year average at a time when active listings are -29% below average. There is a disconnect between advertised supply & housing demand, even in the cities where lockdown restrictions are active which is keeping upwards pressure on housing prices.