Home values are rising at the fastest pace in 32 years

CoreLogic’s national home value index has recorded a +2.8 per cent rise in March, which is the fastest rate of growth since October 1988. And according to agents, listings on the market cannot keep up with buyer demand.

National property values: March 2021

Australian property values have continued to surge over March, with values up +2.8 per cent, bringing the national median dwelling value to $614,768. 

According to the real estate data giant, the current strength in growth conditions remains ‘broad-based,’ with home values surging by at least +1.4 per cent across every capital city and ‘rest-of-state’ region. 

Sydney and Melbourne have now recovered from earlier downturns, and with the acceleration in capital gains across Sydney and Melbourne, values have started to outpace many of the smaller capitals that were previously leading the charge. 

While regional Australia is still experiencing an upswing in growth, for the first time in a year, capital city housing values have outperformed their regional counterparts, recording a +2.8 per cent lift compared with 2.5 per cent across the combined regionals.  

That’s not to discount the performance of regional values, which still remains extremely strong. Gains were highest in regional New South Wales. 

According to CoreLogic’s research director, Tim Lawless, housing values in regional areas are +11.4 per cent higher over the past year, which demonstrates the earlier stronger growth trend we saw.

“Capital values are now 4.8 per cent higher on an annual basis with the acceleration of growth evident in March,” he said. 

The current boom continues to be house-led, with houses outperforming units for capital gains. Nationally, houses edged +3.0 per cent higher over the month, while units were up +1.9 per cent. 

According to Mr Lawless, the inner-city unit markets of Sydney and Melbourne have “turned a corner” — citing two consecutive months of rising values for Sydney units, and a consistent uplift in values seen across Melbourne unit markets since October 2020. Mr Lawless says that this trend has accelerated over recent months. 

In comparison to past booms, CoreLogic’s head of Australian research Eliza Owen says that this time around it’s not investors driving property values, but rather a greater presence of owner-occupiers in the market.

Sydney and regional NSW

Over the month, Sydney was the frontrunner, with values rising a huge 3.7 per cent — making growth +6.7 per cent higher over the first quarter of 2021. This brings the median value of a property to $928,028. 

Unsurprisingly, houses outperformed units, rising a massive +4.3 per cent over the month, compared to +2.1 per cent for units. 

Dwelling values across the city have staged a remarkable recovery and are now 2.6 per cent higher than their July 2017 peak: a huge feat given that Sydney property values dropped -14.9 per cent through to May 2019, and a further -2.9 per cent fall due to the COVID downturn. 

The premium end of the market is a key driver of this huge acceleration in growth — according to CoreLogic, upper quartile home values were +4.8 per cent higher over the month, compared with a +2.2 per cent lift over the lower quartile.

During the downturn, it was premium-end properties leading the drop in values; this has now reversed, with buyers taking advantage of improving economic conditions and the lowest interest rates in history. 

According to CoreLogic’s research director, Tim Lawless, “The last time Sydney housing values recorded a quarterly trend this strong was in June/July 2015. 

“Following this brief surge, the pace of growth rapidly slowed as limits on investor lending kicked in to slow the market,” he said.

Regional NSW property prices

Regional values in New South Wales edged +2.8 per cent higher over the month, bringing property values up by +6.6 per cent over the quarter. 

While performance was strong across all property types, it was houses that led the charge, up +2.9 per cent over the month, compared to the +2.3 growth seen across the regional unit sector. 

This growth across regional New South Wales is not surprising. According to CoreLogic’s latest Regional Market Update, which examined regional market performance across the country for the 12 months leading up to January 2021, two regional markets in New South Wales were star performers. 

The Richmond-Tweed region in Northern New South Wales recorded yearly growth of 12.6 per cent, while Newcastle and Lake Macquarie had the lowest incidence of vendor discounting nationally, at just -2.4 per cent. 

There is a general consensus amongst agents and industry pundits that the push towards the regions is still being driven by a shift to a working-from-home culture driven by COVID.

Melbourne and regional VIC

Over March, Melbourne values rose by 2.4 per cent, with values up 4.9 per cent over the quarter. The median value of a property in Melbourne now sits at $736,620, a new record high. 

Like most markets, detached housing is outperforming units, up 2.6 per cent for the month, compared to a rise of 1.7 per cent for units. Though, CoreLogic notes that the unit market is turning a corner off the back of consistent values growth since October last year, with the trend gaining pace over recent months. 

There’s even better news for Melburnians — with CoreLogic reporting that housing values have recovered from the -11.1 per cent fall between 2017 and 2019, as well as the -5.6 per cent drop in values during the COVID downturn. 

Like Sydney, the premium end of the market is a key driver of value growth in the city. The upper quartile of housing stock in Melbourne grew by +2.8 per cent, outpacing the lower quartile which posted a +1.6 per cent increase over the month. 

Regional VIC property prices

In March, Victoria was the only state where regional values rose at a faster pace than their capital city counterparts. Regional Victorian values were up +2.6 per cent compared with a +2.4 per cent rise across Melbourne. As we can see, the tree and sea changers are still out in full force. 

Geelong was a strong performer, recording annual growth of +6.9 per cent, and according to CoreLogic’s latest quarterly regional update, units in this coastal region had the lowest vendor discount (-2.0 per cent) across 25 regional markets. 

Mildura has been popular with investors, whilst Bendigo is attracting strong owner-occupier interest from both locals and Melburnians looking to relocate. The Macedon Ranges continues to attract buyers searching for lifestyle properties. 

Of all 25 regional markets around the country, recent CoreLogic data shows that Ballarat houses are selling the fastest, sitting on the market for just 27 days.

Brisbane and regional QLD

Brisbane values continued on an upward trajectory throughout March, growing by a strong +2.4 per cent to a median value of $548,260. Houses were the star performer, growing in value by +2.6 per cent, with units growing by a more modest +1.0 per cent. 

Owners of premium properties in Brisbane will be happy to know that the upper quartile (up +2.8 per cent) of the market rose at nearly triple the rate of lower quartile properties (up +1.1 per cent).

During the height of COVID, and now as we move through 2021, the Brisbane market has continued on an upward trajectory.

While the market has always had a reputation for stability, it hasn’t really had the same ‘boom’ reputation as the more bullish markets of Sydney and Melbourne — though some pundits believe that given the market’s current performance, all is about to change. 

With plenty of state investment in infrastructure, employment in construction is surging. In addition, the Sunshine State has earned an incredible reputation for how it has handled the pandemic — this in combination with a sunnier lifestyle is driving interstate migration from our southern states. 

Brisbane investor activity is also expected to pick up; vacancy rates are low, sitting at around 1.7 per cent, and yields are at a healthy 4.3 per cent. Contrast this with Sydney where yields are currently 2.7 per cent. These figures suggest that demand is outstripping supply. 

Regional QLD property prices

Properties in regional Queensland have enjoyed another month of growth over March, with all dwelling types rising by a combined +2.3 per cent over the month to a median value of $429,369. 

Like many other non-metro parts of the country, regional Queensland is benefitting from a shift to remote working. Demand from both investors and owner-occupiers is continuing to grow — this is obviously a trend that is more pronounced in certain areas of the state. 

Areas that are proving popular are coastal — such as the Sunshine Coast and the Gold Coast. Agents have remarked that investors are once again showing interest in the larger high rise apartments dotted throughout Surfers Paradise.

On the Sunshine Coast, the market remains incredibly tight, with stock remaining low, and demand continuing to rise.

Hobart and regional TAS

Property values in Hobart rose by +3.3 per cent over March to a median value of $548,686. A year ago, Hobart was one of the most affordable capital city markets in Australia, but when we look at median values, it is now more expensive than Perth, Darwin and Adelaide.

According to CoreLogic’s latest data, the median price of a property in Hobart ($548,686) is now higher than Brisbane ($548,260).

Call it the MONA effect, or maybe put it down to COVID, but there’s certainly something about Hobart that is attracting strong interest from both interstate and international buyers.

Call it the MONA effect, or maybe put it down to COVID, but there’s certainly something about Hobart that is attracting strong interest from both interstate and international buyers.

The growth of the market is raising housing affordability issues, especially for locals, who are being priced out of the market. 

According to a recent ABC report, first home buyers in particular are grappling with the heat in the market and competition between buyers — buyers are taking more risks by forgoing building inspections and cooling-off periods in order to appear more desirable to sellers.

Regional TAS property prices

Regional areas of Tasmania are also rising in value, and industry pundits believe this is a knock-on effect from surging prices in Hobart. Compared to Hobart, prices are still more affordable, despite houses rising by +2.2 per cent and units rising an impressive +4.0 per cent over March.

This relative affordability is making the northern city of Launceston and rural areas such as the Huon Valley popular draw cards — and interstate buyers can see value for money too. 

Real Estate Institute of Tasmania president Mandy Welling recently told The Examiner that a surge in owner-occupier demand is having a negative impact on the rental market across the state, and if this were to continue, it would ‘obliterate’ the rental market, in a state where rental conditions are already very tight.

Canberra and the ACT

Canberra continued to perform strongly over March, with the median dwelling value growing +2.8 per cent to $727,032. Houses were the stronger performer, recording growth of +3.3 per cent over the month.

With consecutive months of growth, it’s safe to say that Canberra property is experiencing a sustained boom.

With consecutive months of growth, it’s safe to say that Canberra property is experiencing a sustained boom.

Many factors have contributed to this, including low interest rates, stamp duty concessions and a lack of listings — the result is a competitive environment for buyers, which is playing upward pressure on property prices

First home buyers in particular are finding this market challenging, especially when they’re up against buyers stacked with equity. As a result, off-the-plan properties are proving popular, as the ability to exchange with a 5 per cent deposit is no doubt an attractive option in such an unpredictable environment. 

Locals are left wondering when the median house price will exceed $1 million; if the forecasters are right, it’s only a matter of time. According to ANZ, Canberra properties are expected to rise by 16 per cent in 2021 alone.

Adelaide and regional SA

Property prices in Adelaide continued to grow throughout March, rising +1.5 per cent, bringing the median value of a property to $486,555 — it’s the fastest monthly growth the city has experienced in 14 years. 

Like many other markets around the country, this growth is a result of huge buyer demand spurred on by low interest rates, and government incentives. Prices are being pushed skyward as buyers compete for the limited properties available. 

Adelaide has been exhibiting strong growth for months. According to PointData’s Autumn 2021 “Lay of the Land'' report, a third of Adelaide suburbs have achieved annualised growth of more than five per cent in the six months to February 2021, which at least 90 per cent of regions have achieved some level of growth over this period.

Over the six months, some of the top performing regions were Sellicks Beach (up 28.26 per cent), Maslin Beach (up 25.19 per cent) and Largs Bay (up 18.62 per cent). While many parts of Adelaide have experienced growth, it was the city’s southern suburbs that outperformed their northern counterparts. 

While growth is being felt across much of the city, it’s important to note that this isn’t the same across the board, with the highest rates of growth being experienced in detached housing.

Regional SA property prices

Over March, regional properties in South Australia have recorded growth of +1.5 per cent for houses and a modest +0.1 per cent for units. 

According to Hotspotting’s Price Predictor Index for autumn 2021, 29 of 33 regional South Australian locations have been identified as rising markets. Regions around Victor Harbor are considered to be standout markets.

The report comes as median house prices in regions such as Mount Gambier and Port Lincoln have reached record highs.  

This trend of growth is expected to rise as city-dwellers continue to make the move to regional areas as a result of the pandemic.

Perth and regional WA

Perth is yet another capital city experiencing a rising housing market. According to the Real Estate Institute of Western Australia (REIWA), listing volumes are sitting at the lowest point in a decade. Since buyers are very active in the market, this is putting upward pressure on property prices, and properties are selling in record time. 

CoreLogic’s Tim Lawless told the Sydney Morning herald that “The ratio of sales to new listings is tracking at around 1.1, implying for every new listing added to the market, 1.1 homes are sold.”

“Such a rapid rate of absorption is keeping overall inventory levels low and adding to a sense of FOMO amongst buyers.”

REIWA data also shows that properties in Perth are selling at the fastest rate in 15 years, taking only 17 days on average — this is the lowest time on market since 2006. 

Over March, house prices rose by +1.8 per cent, while units also experienced strong growth of +1.7 per cent.

Regional WA property prices

As values across regional Western Australia continue to rise, interest from investors is beginning to grow as they chase low market entry points and rising yields. 

According to CoreLogic’s latest Pain and Gain report, the regions of Augusta-Margaret River and Busselton were two standout performers.

Recent REIWA data released in March backs this up, showing that the median time to lease a property in Busselton was 11 days in the three months to February 2021. That’s nine days faster than it takes to lease a property in Perth, and 12 days faster than the same time a year ago. 

However, this surge in prices across the state is causing housing affordability woes for many. The Margaret River region in particular has been extremely popular with seachangers searching for affordability and a new lifestyle. The result has been that many locals have been priced out of the market from both a purchasing and renting perspective.

Darwin and regional NT

Over March, dwelling values in Darwin grew by +2.3 per cent. Year on year, CoreLogic data shows that the top end experienced the highest rate of increase in home sales amongst all capitals, up +45.7 per cent.

According to Heron Todd White’s Property Clock report, houses and units in Darwin have entered a period of recovery. 

Industry pundits say that this surge in activity is being driven by interstate migration — a theory that has recently been backed-up by data from the Australian Bureau of Statistics. The ABS data showed a net gain from interstate migration into the city for the first time in six years. 

In addition, investors are setting their eyes on the region again as energy giant Santos has been approved for a major offshore gas development near the capital. The project is worth $5 billion and is expected to produce hundreds of jobs over the course of two decades.

Regional NT property prices

Regional properties in the Northern Territory also experienced a boost in values over March, with houses gaining +1.7 per cent in value bringing the median value to $441,304. Data for units was not available.

Rental market update 

Rental market conditions remain diverse across the country, with significant differences between regions and property types. 

Right now, the tightest rental markets are Darwin (up +5.9 per cent) and Perth (up +7.7 per cent), where both houses and units have recorded double-digit annual rent price growth. 

According to Mr Lawless, the surging prices of rentals in Perth and Darwin started in September 2020.

“The monthly growth in rents across Perth quickly accelerated from an already high 1.1 per cent in September 2020, to 2.0 per cent by March 2021. 

“Darwin rents have risen by an average 2.1 per cent per month for the past seven months, including a 2.4 per cent lift in March 2021. 

“Both these markets have seen a recent history of low housing investment which has kept rental supply low at a time of rising demand,” he said. 

Weaker conditions are being felt in the unit sector compared to houses across each capital city. Since March last year, capital city house rents are up +5.2 per cent, while unit rents are down by -3.8 per cent. 

The unit sectors suffering the most right now are the inner-city apartment markets of Sydney and Melbourne which have copped much of the brunt of stalled overseas migration. However, according to Mr Lawless, conditions in these markets are beginning to stabilise. 

“Sydney unit rents have posted a subtle rise over the past three months, while unit rents in Melbourne have held firm over the same period. 

“The improvement comes after a long running decline, however a material improvement in rental conditions is likely to be dependent on foreign students and visitors returning to shore up inner city unit rental demand,“ he said. 

CoreLogic notes that most regions are still showing a gross yield that is higher than typical mortgage rates, implying that some regions are ripe for positive cash flow investments.  

What is the outlook for the property market in the months ahead?

Well, there’s no doubt about it. The market, across the board, is in the midst of a boom. Across CoreLogic’s home value index, every single capital and ‘rest-of-state’ region recorded a rise in value. 

Low interest rates and recent economic conditions are still amongst the biggest drivers of growth, along with a low level of listings on the market which is ensuring a high level of absorption. 

Forecasters are continuing to predict double digit growth for property over the next two years, but given that housing affordability is once again seeping into the national conversation around real estate, questions around what is likely to happen to prices are swirling. 

It’s inevitable that at some point, price growth will slow. What eventually causes this is nothing more than speculation at the moment. But it could be one of three things:

Regulators stepping in to tighten access to credit - though according to APRA, standards are currently healthy so credit intervention is not an option right now. 

Rising interest rates — though a rise isn’t expected anytime soon. 

Weak economic conditions — as fiscal support has been tapered back, there may be less demand from buyers.