Australian housing values are currently increasing at the fastest rate in seventeen years with February values across all states, averaging a 2.1% increase. The Australian market hasn’t seen an increase this high since August 2003.
Market values have recovered quickly after the global pandemic disrupted home sales in 2020. With low mortgage rates, accelerated economic growth, low supply of properties on the market for sale and the rise of remote workers, home vales are expected to continue booming this year. Home buyers are readjusting where they want to live based on the new work remotely from home environment that has been created as a result of pandemic lock downs.
According to CoreLogic’s research director, Tim Lawless, a synchronized 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 the state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fueled buyer demand.”
Sydney & Melbourne Markets
The two largest cities, Sydney and Melbourne currently have the strongest market potential. Sydney home values rose 2.5% in February and 3.6% in the last quarter. Housing experts are forecasting Sydney values could increase anywhere from 7% to 12% in 2021 alone.
Meanwhile, Melbourne rose to 2.1% last month and 3.5% in the last quarter. The housing values in smaller cities such as in Darwin rose up to 5.5%, Hobart values rose to 4.8% and Perth rose up to 4.2% over the past 3 months.
Mr. Lawless said, “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.”
Shortage of Property Listings
An exploding demand for home buyers but an extremely tight supply of homes on the market results in home prices soaring. CoreLogic’s most recent measure of total listing numbers continues to see advertised supply 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.
Whilst available supply remains at historically low levels, the quarterly number of home sales is estimated to be up 35.3% on 2020 levels, with regional dwelling sales 40.6% higher compared with a 32.0% lift in capital city sales.
The past six months has seen CoreLogic’s estimate of settled house sales rise to be 17.9% above the decade average. Settled unit sales have also trended higher, but remain slightly below the decade average (-0.8%) again reflecting the falling demand for higher density styles of properties.
Sydney’s property market is looking to be super-competitive for home buyers. With a high demand and a low number of available for sale, buyers desperately bid up prices of available properties, pushing prices higher.
According to Mr Lawless, “Housing inventory is around record lows for this time of the year and buyer demand is well above average. These conditions favour sellers. Buyers are likely confronting a sense of FOMO (Fear of Missing Out) which limits their ability to negotiate. Vendor discounting rates were estimated at a record low of 2.6% in February, and auction clearance rates have consistently been in the high 70% to low 80%, which is well above average.” With such tight supply conditions, getting preapproved for a mortgage before you go house hunting is a must.
Based on CoreLogic’s data, Sydney’s rental index has mild rises for 2 successive months. In the month of February, the gross rental yields in Sydney were recorded at 2.9%. Positive cash flow opportunities are more likely in the market with gross rental yields around mid-4% mark or higher.
It is expected that the property market remains strong in 2021 however it moves in cycles and is not that easy to predict. Having an expert in your corner can make all the difference. Connect with an Assured Lending Mortgage Broker for more information.
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