- Last fiscal year, home values surged to levels not seen in nearly two decades, but signs are mounting that the impressive growth is wearing off
- National house values increased by 1.9 per cent in June, bringing annual growth to 13.5 per cent for the financial year, according to CoreLogic
- Houses topped the increase in Australian housing prices, rising 15.6 per cent over the year compared to a 6.8 per cent increase in unit values
- Rent values also continued to see growth in June, rising 6.6 per cent in the year to June although rental yields are compressing hitting a record low of 3.1 per cent
- The 1.9 per cent monthly gain in Australian property prices is far above the decade average of 0.4 per cent but this month’s growth rate is lower than May 2021 and March 2021
Home prices soared at levels not seen for nearly two decades last financial year, but signs are emerging that the boom is starting to run out of steam.
National house values increased by 1.9 per cent in June, bringing annual growth to 13.5 per cent for the financial year, according to CoreLogic.
Houses topped the increase in Australian housing prices, rising 15.6 per cent over the year compared to a 6.8 per cent increase in unit values.
In June, housing prices increased in all of Australia’s main cities, ranging from a three per cent increase in Hobart to a more modest 0.2 per cent increase in Perth.
CoreLogic head of research for Australia Eliza Owen noted that this is the highest annual rate of growth seen across the Australian residential property market since April 2004, when the early 2000’s housing boom was winding down after a period of exceptional growth.
“However, there are some markets where performance is starting to ease more notably,” she said.
“Before the recent uncertainty of growing COVID-19 case numbers, there were plenty of demand-side factors driving housing market growth through the first half of 2021,” Ms Owen said.
Ms Owen noted a fall in unemployment, elevated consumer confidence and savings has encouraged the consumption of housing
“This has all occurred against a back-drop of continued low mortgage rates, which is one of the most significant demand drivers,” she said.
Rent values also continued to see growth in June, although rental yields are compressing with CoreLogic noting a 6.6 per cent rise in rent values in the year to June, the strongest annual appreciation since February 2009.
Darwin and Perth enjoyed the highest annual growth in rent values, 21.8 per cent and 16.7 per cent respectively.
Due to property value increases outpacing rent, gross rental yields have compressed further, with yields hitting a record low of 3.1 per cent.
In addition to these strong demand conditions, Ms Owen noted total advertised stock remains relatively low, 21.4 per cent lower than the five-year average, with CoreLogic finding that there was more than one sale for every new listing added to the market.
The 1.9 per cent monthly gain in Australian property prices is far above the decade average of 0.4 per cent. This month’s growth rate, however, is lower than May 2021 and a recent high in March 2021.
Canberra was the only capital city to show a rise in the monthly growth rate, with housing values rising 2.3 per cent in June, compared to 1.7 per cent in May.
A lack of momentum was particularly noticeable in Perth and Darwin among the capital cities. Between January and May 2021, the monthly increase rate in Perth housing prices was 1.4 per cent but dropped to 0.2 per cent in June. Between January and May, Darwin’s monthly increase rate in housing prices was 2.1 per cent, but only 0.8 per cent in June.
“The key to understanding the softer performance in these resource-based markets may be a slightly different supply-demand dynamic compared to the other capital cities and regions,” Ms Owen said.
“CoreLogic monitors a ‘sales to new listings’ ratio, which divides the monthly volume of settled sales by new listings brought to market. For the past three months, the sales to new listings ratio has averaged 1.1 across Darwin and Perth.
“While the implication is that there is 1.1 sales for each new listing, which could be enough to elicit further growth in dwelling values, these are the lowest sales to new listings results of the capital city markets.”
At the top 25 per cent of the market, growth rates are becoming softer, rising eight per cent in the June quarter, down from 9.2 per cent in the previous three months.
While the eight per cent increase was still the biggest among the value categories studied, the growth rate was also the slowest month-over-month.
Ms Owen said the easing pace of growth in the top end is a clear sign momentum is shifting, as the rest of the market tends to follow movements at the high end.