Australian housing values increased a further 1.6% in August which is a higher rate than average for Australia but the lowest monthly increase for 2021.

Despite many parts of Australia remaining in some level of lockdown, the housing boom continued to increase a further 1.6% in August, taking home prices 14.1% higher over the first seven months of 2021 and 16.1% higher over the past twelve months. The national housing growth value is currently the fastes we have seen since February 2004.

While the rate of growth continues to grow, we are seeing the housing market start to lose stream. Dwelling values rose 5.2% in the three months to August, a slowdown from the recent quarterly peak of 7.0% in May. CoreLogic research director Tim Lawless said “Housing prices have risen almost 11 times faster than wages growth over the past year, creating a more significant barrier to entry for those who don’t yet own a home. It’s likely the ongoing shortage of properties available for purchase is central to the upwards pressure on housing values.”

Sydney

 
Change in dwelling values last month  ^1.8%
Change in dwelling values last 12 months  ^20.9%
Median house value  $1,293,450
Median unit value  $825,514
Average selling time on market  38 days
Rental yield houses  2.3%
Rental yield units  3.1%

Sydney is recording the next largest rise in housing values over the month at 1.8%, however it is also the city which has recorded the sharpest reduction in the pace of growth from earlier highs. Houses in Sydney climbed to a median value of $1,293,450, while apartments increased 1.4% to $825,514. The monthly growth is down from a recent high of 3.7% in March to 2.0% in July. Sydney is the most expensive city by some margin and it has also been the city where values have risen the most in 2021. Worsening affordability is likely a key contributing factor in the slowdown, along with the negative impact on consumer sentiment, as the city moves through an extended lockdown period. Sydney house values are up 20.9% over the past twelve months, while unit values are up less than half of that rate with 7.6% over the year.

Melbourne

 
Change in dwelling values last month  ^1.2%
Change in dwelling values last 12 months  ^13.1%
Median house value  $954,496
Median unit value  $615,909
Average selling time on market  37 days
Rental yield houses  2.5%
Rental yield units  3.5%

Melbourne’s housing market has moved through another solid month of growth with property values rising 1.2% over August to be 13.1% higher over the year. Melbourne houses have now risen to a new median record of $954,496, while units were up 0.5% to a median value of $615,909. While the annual rate is about double the decade average, it is the lowest annual increase across all the capital cities. The softer performance relative to other regions is due to several different factors. These include weaker unit market conditions where values are up by 5.9% over the year, weaker demographic trends as population growth is negatively impacted by closed international borders and stronger migration to the regional areas of the state, and more significant impact from COVID and lockdowns.

Brisbane

 
Change in dwelling values last month  ^2.0%
Change in dwelling values last 12 months  ^18.3%
Median house value  $674,738
Median unit value  $419,143
Average selling time on market   25 days
Rental yield houses  2.5%
Rental yield units  3.5%

Brisbane housing market has held firm relative to the larger capital cities. While there is some evidence that growth in housing values has slowed, the reduction is nowhere near as sharp as Sydney or Melbourne. Similar to most regions around the country, house values are rising at a faster pace than unit values with annual growth of 17.7% for houses and 7.0% for units. The outlook for Brisbane is looking more positive though, with a strong demographic trend fueled by interstate migration, less lockdown restrictions than some of the other states, a large infrastructure budget and a growing level of excitement following the announcement that Brisbane would host the 2023 Olympic games. It is likely the strong market fundamentals along with a lower price point and higher yield than the larger capitals will be attractive to investors.

Overall, the Australia market remains in a strong position, however the growth in property values will make affordability more challenging for many home buyers. The possibility of tighter credit policies and suggestions of an earlier than expected lift in home loan interest rates would have an immediate dampening effect on the housing market. 

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