Australian property market update - January 2021

The latest CoreLogic Home Value Index reveals a strong start to 2021 with all capital cities recording a rise in value. 

National home values increased +0.9 per cent, taking prices to a record high and exceeding the previous peak in 2017.

National property values: January 2021

Houses

$607,389

Monthly change: +1.1%

Units

$528,186

Monthly change: +0.2%

Australian property values have recovered more quickly than expected, with the latest figures revealing a +0.9 per cent rise over January. 

This increase takes national home values to a record high, surpassing pre-COVID levels by +1.0 per cent. 

Price growth varied around the country, with the biggest markets of Sydney and Melbourne both recording a rise of less than half a percent, while Darwin prices surged +2.3 per cent. 

Regional areas continue to outperform their capital city counterparts with home values up +1.6 per cent over the month compared to +0.7 per cent for combined capital cities. 

Another trend that has continued is the demand for houses over units as buyers seek larger spaces to live. Nationally, house values have increased +3.5 per cent over the past six months while unit values are unchanged, pointing to a house-led recovery.

Domain’s Senior Research Analyst, Dr Nicola Powell told The Sydney Morning Herald that low interest rates and a remarkable recovery in consumer confidence is likely to underpin further growth in detached housing in Sydney. 

“I think we will likely see prices continue to rise for houses. One of the key things driving prices forward is historic low interest rates. They tumbled over 2020,” she said. 

The incredible level of demand for property is further highlighted in the latest Australian Bureau of Statistics (ABS) Lending Indicators data which reveals that the value of new home loan commitments reached record highs in December 2020. 

The latest figures show first home buyers continue to drive the market with home loan commitments rising +9.3 per cent in December and a whopping +56.6 per cent over the year. 

This is the highest number of first home buyers since 2009 when the government tripled the first home owner grant as part of their response to the global financial crisis. 

Other government measures have been effective in maintaining strong demand in property. 

ABS Head of Finance and Wealth, Amanda Seneviratne notes that the value of construction loan commitments grew by 17.1 per cent in December, more than doubling since the June implementation of the HomeBuilder grant. 

“Federal and state government measures, such as HomeBuilder, and historically low interest rates are supporting ongoing growth in housing loan commitments,” she said. 

While housing demand continues to rise, listing numbers remain below average. 

Tim Lawless, CoreLogic’s Head of Research believes that listing numbers will rise throughout the year as seller’s recognise the strong selling conditions on offer. 

“Advertised supply levels are low while demand is strong. This is a seller’s market, but for some reason we are still seeing below normal vendor numbers across most markets. 

“With sentiment rising and selling conditions favouring the vendor, it is reasonable to expect new listing numbers will rise as the year progresses which may help to temper housing market conditions,” he said 

CoreLogic Head of Australian Research, Eliza Owen agrees, recently telling ABC News that she anticipates an ease in price growth as more sellers enter the market.

“We’re expecting to see an increase in listings as vendors respond to rising demand and kind of wake up to the idea that it is a pretty good time for sellers,” she said.

“That could help to slow some of the momentum of growth as we see more supply come onto the market,” she said.

Sydney and regional NSW

Houses

$1,034,848

Monthly change: +0.1%

Units

$734,198

Monthly change: -0.1%

Over the month, Sydney property prices rose a mild +0.4 per cent to a median value of $879,299. 

Amidst record low levels of investor participation and demand for lower density housing, it’s unsurprising that Sydney house prices continue to outperform units. In January, house prices rose +0.7 per cent while units declined -0.1 per cent. 

Over the longer term, Sydney home values are still trending up with prices +2.0 per cent higher than they were twelve months ago. 

As property prices recover, so too has seller confidence with our latest Consumer Sentiment Survey revealing that 75 per cent of NSW respondents believe property prices will rise in the next six months. 

Of those surveyed, 22 per cent NSW respondents believe that property prices will stay the same and only 3 per cent believe prices will fall.  

Regional NSW property prices

Houses

$530,594

Monthly change: +1.6%

Units

$430,223

Monthly change: +0.9%

In regional NSW, home values are rising more than three times the pace of properties in Sydney. 

Regional property prices rose +1.5% in January compared to the +0.4 per cent increase across Sydney homes. 

Over the past twelve months, regional properties in NSW have seen solid growth, with an increase of +9.5 per cent. 

According to Mr Lawless, the divergence between metro and regional housing demand is more pronounced in the largest markets of NSW and VIC as more people migrate to the outer fringe and regional markets. 

“Better housing affordability, an opportunity for a lifestyle upgrade and lower density housing options are other factors that might be contributing to this trend, along with the new found popularity of remote working arrangements,” he said.

Melbourne and regional VIC

Houses

$821,904

Monthly change: +0.6%

Units

$577,206

Monthly change: +0.1%

Melbourne home value growth was on par with Sydney’s over January, rising a modest +0.4. The median value of a Melbourne property now sits at $692,162. 

Melbourne houses performed better than units over the month, climbing +0.6 per cent compared to +0.1 for units. 

While listings have declined -4.7 per cent over the month according to SQM Research, ABS data shows that Victorian owner-occupier home loan commitments rose a sharp +20.1 per cent in December. 

This reflects the resurgence in housing market activity after COVID-19 restrictions were eased. 

VIC consumer sentiment is also recovering quickly with OpenAgent Consumer Sentiment data showing 82 per cent of respondents believe property prices will rise in the next six months while only 2 per cent believe prices will fall.

Regional VIC property prices

Houses

$455,046

Monthly change: +1.6%

Units

$313,183

Monthly change: +1.6%

Regional VIC houses and units performed strongly over January, both increasing +1.6 per cent.  

Annually, regional VIC properties are up +6.5 per cent higher than they were the same time last year. 

The rapid increase in value has been attributed to increased remote working opportunities, allowing buyers to look further from the city to more affordable, lower density housing found in regional areas. 

According to Mr Lawless, there is declining demand for housing in metro areas.

“Internal migration data shows more people leaving Sydney and Melbourne for regional areas, resulting in a transition of activity from the metro regions to the outer fringe and regional markets. 

“This demographic trend is further compounded by the demand shock of stalled overseas migration. As Melbourne and Sydney historically received the vast majority of overseas migrants, those metro areas have been hit the hardest by this demand shock,” he said.

Brisbane and regional QLD

Houses

$583,902

Monthly change: +1.0%

Units

$393,177

Monthly change: +0.4%

Brisbane property prices rose +0.9 per cent over January with the median value sitting at $527,826. 

Over the longer term, Brisbane property prices have been steadily increasing, up +2.5 per cent over the past three months and +4.0 per cent over the year. 

Looking at house and unit performance, similar to the other states, houses performed better than units over the month increasing +1.0 per cent while units grew +0.4 per cent. 

The latest figures from our Consumer Sentiment Survey show that QLD sentiment is the highest ever recorded with almost 88 per cent of respondents believing property prices will rise in the next six months. 

Of the respondents, 10 per cent believe prices will stay the same while only 2 per cent believe prices will decline.

Regional QLD property prices

Houses

$426,750

Monthly change: +1.7%

Units

$383,645

Monthly change: +1.1%

Regional QLD property prices continued to rise over the month with home values up +1.6 per cent to a median of $414,280. 

Regional houses and units both saw growth over January with houses increasing +1.7 per cent and units by +1.1 per cent. 

Over the longer term, regional QLD properties have performed quite well with prices +7.7 per cent higher than they were the same time last year. 

Hobart and regional TAS

Houses

$562,035

Monthly change: +1.6%

Units

$427,767

Monthly change: +1.2%

Over January, Hobart property values increased +1.6 per cent to $523,932. 

Hobart houses climbed +1.6 per cent while units performed very well, up +1.2 per cent - the highest monthly increase of all the capital cities. 

Annually, Hobart property values are +6.8 per cent higher than they were the same time last year. 

The latest SQM Research listings data shows that Hobart listings are down -1.2 per cent over the month. 

Louis Christopher, Managing Director of SQM Research said that this is a common trend usually observed at the beginning of the year.  

“The month of January traditionally records falls in properties listed for sale as the market is still in a summer holiday mode,” he said. 

Regional TAS property prices

Houses

$366,620

Monthly change: +1.7%

Units

$276,965

Monthly change: +0.1%

Regional TAS properties increased +1.5 per cent over the month to a median of $353,700.  

Houses led the gains with a +1.7 per cent rise while units grew a mild +0.1 per cent. While unit growth was modest, it’s an improvement from last month where growth was in the negatives. 

Looking at values year-on-year, regional TAS properties have increased the most out of all regional and capital cities with prices up an incredible +12.1 per cent.

Canberra and the ACT

Houses

$770,232

Monthly change: +1.3%

Units

$477,196

Monthly change: +1.0%

Canberra property prices continued on an upward trajectory over the month, increasing +1.2 per cent to a median of $686,524. 

Annually, Canberra home values have held up extremely well, up +6.8 per cent. 

Canberra houses and unit prices both grew in January with house prices rising +1.3 per cent and unit values +1.0 per cent. 

In terms of listings, SQM research data shows there is less stock on the market as Canberra property listings have declined -2.9 per cent over the month.

Adelaide and regional SA

Houses

$509,987

Monthly change: +1.1%

Units

$344,467

Monthly change: -0.2%

Over the month, Adelaide property values climbed +0.9 per cent to a median of $473,170. 

House and unit performance have diverged with home values increasing +1.1 per cent while unit values declined -0.2 per cent. 

In the longer term, property prices are +6.5 per cent higher than they were the same time last year. 

The latest figures from the OpenAgent Consumer Sentiment Survey show that seller confidence in SA is extremely high, with almost 90 per cent of respondents believing property prices will rise in the next six months. 

Of the respondents, 6 per cent believe prices will stay the same and 6 per cent believe prices will fall. 

Regional SA property prices

Houses

$263,604

Monthly change: +2.5%

Units

$200,055

Monthly change: -0.4%

Regional SA was a top performer over the month with home values climbing +2.3 per cent. 

This stellar performance was driven by houses, which increased +2.5 per cent over January, while units were the worst performing, down -0.4 per cent. 

Year-on-year, regional SA home prices have performed remarkably well, with values up +10.6 per cent. 

Perth and regional WA

Houses

$506,083

Monthly change: +1.7%

Units

$369,531

Monthly change: +0.8%

Over the month, Perth property prices continue to increase and hold strong, up +1.6 per cent to a median of $484,280. Annually Perth properties are +3.4 per cent higher over the year. 

Perth houses outperformed units, rising +1.7 per cent compared to +0.8 per cent for units. 

In terms of property on the market, SQM Research listings data reveals Perth as the only city that recorded an increase in properties for sale over the month, up +0.1 per cent.

Regional WA property prices

Houses

$350,922

Monthly change: +1.8%

Units

$229,403

Monthly change: +6.8%

In Regional WA, property prices increased +2.0 per cent over the month to a median of $338,534. 

Regional WA has been the only region where units have outperformed houses with units up +6.8 per cent compared to +1.8 per cent for houses. 

Over the past 12 months, regional WA property values are still -2.6 per cent lower. 

Darwin and regional NT

Houses

$516,050

Monthly change: +3.7%

Units

$291,475

Monthly change: -0.5%

Darwin continues to be a top performer over January with home values up +2.3 per cent to a median of $426,215. 

Houses performed significantly better than units, up +3.7 per cent, while units declined half a percent. 

Annually, Darwin is also the top performer with prices up +11.4 per cent compared to the same time last year. 

Data from SQM research shows that Darwin listings are down -2.1 per cent over the month and -13.8 per cent over the year.

Regional NT property prices

Houses

$433,632

Monthly change: -0.3%

Units

$ n/a

Monthly change: n/a

Regional NT house prices declined -0.3 per cent over the month to a median of $433,632.  

Over the longer term, regional NT properties are still down -1.3 per cent over the past twelve months. 

Rental market update 

Throughout the pandemic, stalled overseas migration caused an oversupply and weak demand for units, particularly in the inner city areas of Sydney and Melbourne.  

As vacancy rates increased, asking rents for units in Melbourne and Sydney plummeted,  down -7.8 per cent and -5.6 per cent respectively over the year. 

There are early signs that the rate of decline is easing across the unit sector, which is great news for landlords who may have properties left untenanted over an extended period of time. 

Melbourne rents have held firm over the month while Sydney unit rents have posted the first month-on-month rise since March last year, up +0.8 per cent. 

Brisbane and Hobart rents which were also declining have recently shown signs of stabilising as rents start to rise slowly. 

Mr Lawless believes the recovery could be due to people returning back to the office. 

“Part time job numbers have now fully recovered back to pre-COVID levels and more businesses are embarking on a return to work program which could be helping to support renewed demand towards inner city rental accommodation. 

“Additionally, with rental rates now lower for inner city units, improved affordability could be attracting more people back to inner city renting,” he said. 

Darwin has the highest annual change in rents of all the capital cities with house rents up +12.4 per cent and units rents climbing +10.0 per cent. 

Darwin’s strong rental conditions and double digit growth is a result of extremely tight rental supply at a time of rising demand. 

Across the capital cities, gross rental yields are the highest in Darwin at +6.0 per cent and lowest in Sydney at +2.9 per cent. 

In our non-capital city areas, regional NT reports an impressive yield of +7.0 per cent while regional VIC reported the lowest at +4.3 per cent. 

What does this mean for the Australian property market? What is the outlook for the months ahead?

Overall, January figures show that the property market has started the year quite strong with many expecting further rises to prices in the year ahead. 

Headwinds around the Australian property market have tailed off as the economy continues to outperform forecasts. 

The latest ABS employment data shows that the labour market continued to recover at the end of last year with employment increasing by 50,000 people between November and December 2020. 

Mortgage deferrals have also reduced to just 2.4 per cent of all mortgages, with buyer activity strong despite border closures. 

In his February 3rd address to the National Press Club of Australia, Philip Lowe, the Governor of The Reserve Bank of Australia (RBA) said that Australia’s economic recovery has been faster than expected and he expects that GDP will return to pre-COVID levels by the middle of this year. 

“...despite the pandemic having very significant economic costs, the downturn was not as deep as we had feared and the recovery has started earlier and has been stronger than we were expecting. 

“Employment growth has been strong, as have retail sales and new house building. Across many indicators, including GDP, the outcomes have been better than our central forecasts and often better than our upside scenarios as well,” he said. 

During his address, Mr Lowe also announced that record low interest rates will remain until at least 2024. 

Sustained low interest rates will continue to stimulate the property market by encouraging demand, increase housing construction and subsequently increase property prices.