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Is this our Fastest Property Boom in 17 years?
08-Mar-2021
Australian house prices have boomed 2.1% higher in February introducing the largest month-on-month change we have seen in the past 17 years. This surge of house value across Australia has been a result of record low mortgage rates, government incentives, improved economic conditions and the low advertised supply of houses.
This boom has a diverse nature, impacting both city and regional areas across Australia. The last synchronised growth like this was seen over a decade ago when buyer demand was driven as a result of the GFC.
Currently, the strongest performing markets across Australia are in capital cities, Sydney and Melbourne. These cities have respectively shown an increase by 2.5% and 2.1% and demonstrate a much stronger performance than their 2020 results. It is however unclear if these rate increases will be able to be maintained. The head of research at Core Logic, Tim Lawless states, “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.”
The performance gap between regional (average increase of 2.1%) and city areas (average increase of 2%) have also significantly narrowed. Through the climax of COVID 19 last year, regional areas still managed to record less of a decline while demonstrating a strong growth trend towards the end of the year. The increased preference of regional areas has been reflected in the growth rate where the index is 9.4% higher, with city growth rate index is much smaller at 2.6%.
The difference with this property boom is that it is highly motivated by owner-occupier homebuyers instead of investors who previously encouraged previous market booms. In 2015, 46% of mortgage lending were investors, whereas today it is only 23%. Lawless states that this could be due to narrower credit policies and interest only lending along with a weaker rental demand.
SOURCE: The Real Estate Conversation and The Sydney Morning Herald
This boom has a diverse nature, impacting both city and regional areas across Australia. The last synchronised growth like this was seen over a decade ago when buyer demand was driven as a result of the GFC.
Currently, the strongest performing markets across Australia are in capital cities, Sydney and Melbourne. These cities have respectively shown an increase by 2.5% and 2.1% and demonstrate a much stronger performance than their 2020 results. It is however unclear if these rate increases will be able to be maintained. The head of research at Core Logic, Tim Lawless states, “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.”
The performance gap between regional (average increase of 2.1%) and city areas (average increase of 2%) have also significantly narrowed. Through the climax of COVID 19 last year, regional areas still managed to record less of a decline while demonstrating a strong growth trend towards the end of the year. The increased preference of regional areas has been reflected in the growth rate where the index is 9.4% higher, with city growth rate index is much smaller at 2.6%.
The difference with this property boom is that it is highly motivated by owner-occupier homebuyers instead of investors who previously encouraged previous market booms. In 2015, 46% of mortgage lending were investors, whereas today it is only 23%. Lawless states that this could be due to narrower credit policies and interest only lending along with a weaker rental demand.
SOURCE: The Real Estate Conversation and The Sydney Morning Herald