Australian Financial Review Wednesday 2 June 2021
Housing values have surged to record highs across all capitals except Perth and Darwin, with more growth expected in coming months as strong demand from buyers chases a dwindling number of listings.
Dwelling prices across the combined capitals surged 2.3 per cent in May – the second-fastest growth rate since the 1980s, according to CoreLogic analysis.
Underpinning the growth, total listings around the country fell by 6.3 per cent over the month, separate figures from SQM Research show.
All capital cities posted strong increases, led by Hobart with a 3.2 per cent lift in prices. Next was Sydney at 3 per cent. Capital city prices are now on average 7.8 per cent above the previous record set in September 2017.
The growth momentum will eventually slow, however, as affordability worsens or if the banking regulator steps in with macro-prudential curbs, analysts say.
Dwelling prices over the year jumped by 10.6 per cent nationally – the strongest growth in almost 11 years.
In regional areas, home prices rose by 2 per cent in May and were up by 15.2 per cent on the year – the largest growth rate in nearly 17 years.
House prices posted 2.6 per cent monthly growth, while apartment prices rose by 1.4 per cent. House prices over the past 12 months rose by 11.4 per cent, while apartment prices grew by 3.5 per cent.
The housing boom is expected to continue until there is a policy response, likely to be macro-prudential tightening, rather than Reserve Bank rate rises or government policy or tax changes, investment bank UBS said.
“Our view remains that macro-prudential policy tightening will likely be implemented around October – when the Council of Financial Regulators is due to meet, and the RBA release their semi-annual Financial Stability Review,” UBS economist George Tharenou wrote.
“The trigger flagged by APRA (Australian Prudential Regulation Authority) was a substantial increase in housing credit growth to above income growth – which is a condition we expect to be met by then, given our view housing credit lifts above 6 per cent year-on-year year ahead.”
AMP Capital chief economist Shane Oliver said the worsening affordability was becoming an increasing constraint once again.
“Poor affordability will start to bite as the year progresses and the massive pick up in housing construction will dampen price increases, particularly with the borders remaining closed,” he said.
While still trailing house price growth by a wide margin, unit values have strengthened across capitals as investors start to return to the sector.
CoreLogic research director Tim Lawless said unit prices were likely to increase further as house prices rise to unaffordable levels.
“I think we’ll see demand diverting to a more affordable sector of the marketplace like apartments, particularly in Sydney where the pricing gap between houses and apartments is around 50 per cent,” he said.
Even in the Melbourne CBD, where high-rise apartments have borne the brunt of the downturn, price rises are starting to be seen, Mr Lawless said.
“We’re only seeing subtle growth in apartment values at the moment, but every single subregion of inner Melbourne has risen in value over the past three months,” he said.
Sales turnover has also risen with unit sales now tracking 15 per cent above the average.
“I think part of that will be driven by investors who are starting to come back and become more active in the market, but also through demand being diverted into the sector purely through the lower price points that they are offered,” Mr Lawless said.
In the near term, prices are set to rise strongly as new listings fall by 2.4 per cent over May to 79,673 properties on the market nationally, figures from SQM Research show.
Total listings around the country have dropped by 6.3 per cent over the month and were down by 19.2 per cent from a year ago.
“The reality is that the 79,000 new listings are simply not enough to satisfy buyer demand right now,” SQM Research managing director Louis Christopher said.
“Buyers are so desperate that they are now raiding the oldest stock that has been on the market for months due to some defects or priced too high.”
