According to CoreLogic, Australian home values surged 2.1% higher in February; the largest month-on-month change in the national home value index since August 2003.
A combination of record low mortgage rates, improving economic conditions, government incentives and a significant shortage of inventory has created a broad-based boom across the housing market nationally.
Values rose in every capital city, and throughout each state regionally, confirming a growth phase that hasn’t been seen in Australia for more than a decade.
Sydney and Melbourne were amongst the strongest performing markets, gaining 2.5% and 2.1% respectively in just four weeks, however, the quarterly trend saw smaller cities like Darwin (5.5%+), Hobart (4.8%+) and Perth (4.2%+) outperform their larger cousins.
Both Sydney and Melbourne remain below their peaks, but at this rate it won’t be long before new record highs are established.
Monthly change in capital city home values
Annual regional price gains exceed capital cities
The outflow of city-based residents continued through February, with regional markets gaining a further 2.1%, thereby turning in a stronger performance. However, the performance gap has narrowed, compared with the earlier phase of the growth cycle.
Regional house prices experienced less of a decline last year, when city properties were worst affected by COVID, but putting everything in context, regional housing values have increased 9.4% in the past year, whereas city prices have risen 2.6%.
Apartment market weakness persists
A housing market trend that has persisted through the COVID period, to-date, is the weaker performance of unit markets relative to detached housing. House prices over the past three months have recorded growth rates three times higher than that of apartments – 4.4% versus 1.4%.
Why are property prices increasing so rapidly?
CoreLogic’s most recent measure of total listing numbers continues to see advertised inventory significantly below that of recent years. The number of properties advertised for sale nationally remained 26.2% below 2020 levels over the 28 days ending February 21.
This level of supply represents historically low levels, on a month per month basis, however the quarterly trend hold promise for buyers. By that measure, the number of home sales is up 35.3% on 2020 levels, with regional dwelling sales 40.6% higher compared with a 32% lift in capital city sales.
The imbalance between supply and demand is the central factor driving house prices higher. With supply at record lows for this time of year and buyer demand well above average, conditions favour sellers.