Australian home values surged 2.1% higher in February; the largest month-on-month change in CoreLogic’s national home value index since August 2003. Spurred on by a combination of record low mortgage rates, improving economic conditions, government incentives and low advertised supply levels, Australia’s housing market is in the midst of a broad-based boom.
Housing values are rising across each of the capital city and rest of state regions, demonstrating the diverse nature of this housing upswing.
According to CoreLogic’s research director, Tim Lawless, a synchronised growth phase like this hasn’t been seen in Australia for more than a decade.
“The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fueled buyer demand.”
Sydney and Melbourne were among the strongest performing markets, recording a 2.5% and 2.1% lift in home values over the month respectively, as Australia’s two largest cities caught up from weaker performance through 2020. The quarterly trend however, is still favouring the smaller cities; Darwin housing values rose 5.5% over the past three months, Hobart values rose 4.8% and Perth was up 4.2%.
“Whether this new found growth in Sydney and Melbourne can be sustained is unclear. 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. With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge in these cities,” Mr Lawless said.
Regional markets (up +2.1% over the month) have continued to show a higher rate of capital gain relative to the capital cities (up +2.0%), however the performance gap has narrowed compared with the earlier phase of the growth cycle. Regional areas generally recorded less of a decline in housing values through the worst of the COVID period last year, while also showing an earlier and stronger growth trend through the second half of last year. This regional preference is reflected in the annual growth trend, where the combined regionals index is 9.4% higher while the combined capital city index is up a much smaller 2.6%.
A housing market trend that has persisted through the COVID period to-date is the weaker performance of unit markets relative to detached housing. Across CoreLogic’s combined capitals index, house values (+4.4% over the past three months) have recorded a growth rate more than three times higher than that of its unit counterparts (+1.4%). There are some tentative signs this trend could become less obvious, with Sydney unit values recording their first month of growth since April last year and Melbourne unit values recording their largest gain since late 2019.