The Covid-19 housing market slump may be well and truly over as housing prices across the country surge at its fastest increase in 32 years to a new record high.
Released today, the latest national home value index figures from CoreLogic shows a dwelling value increase of 2.8 per cent in March 2021. This is the fastest rate of appreciation since October 1988, in which values increased by 3.2 per cent.
Sydney saw the greatest increase in March, with dwelling values booming by 3.7 per cent, bringing the median value to $928,028. This was followed by Hobart, which saw monthly dwelling values increase by 3.3 per cent.
CoreLogic’s research director, Tim Lawless, reported that Sydney dwelling values are now “2.6 per cent higher than their July 2017 peak.”
“A remarkable recovery considering the -14.9 per cent drop in values through to May 2019 and the further -2.9 per cent fall throughout the COVID downturn
“Similarly, Melbourne housing values have recovered from the -11.1 per cent fall between 2017 and 2019, and the -5.6 per cent drop in values through the worst of the COVID related downturn to set a new record high in March,” said Mr Lawless.
CoreLogic dwelling values – March 31, 2021
|Capital city||Monthly change in dwelling values||Median value|
Source: March CoreLogic Hedonic Home Value Index.
Why are dwelling values rising so rapidly?
Whether you’re a first home buyer struggling to get a foot on the property ladder or a long-term investor enjoying high yields, you may be wondering how and why dwelling values have risen so rapidly.
AMP Capital Chief Economist, Shane Oliver, attributed this growth to “ultra-low mortgage rates, multiple government home buyer incentives, economic recovery, the strengthening jobs market and now an increasing element of FOMO, combined initially with low listings are driving prices sharply higher.”
Current advertised housing stock over March was more than 25 per cent below the five-year average, according to a recent ABC News article. Put simply, there’s currently a high demand (fuelled by a number of factors) and lack of supply, which is creating a perfect storm of increasing dwelling values.
And it’s not only capital cities which are seeing dwelling values increase, but regional areas are continuing to grow.
“The pandemic-driven desire to “escape from the city” also appears to be pushing up suburban house prices and regional prices up at a faster rate than its depressing inner city unit prices in Sydney and Melbourne,” said Mr Oliver.
Last year, Corelogic’s Regional Market Update found that regional properties were appreciating in value quicker than city counterparts, as more and more Aussies relocated from cities to regional areas.
In fact, the latest CoreLogic figures were the first time in a year that growth in capital city housing values (2.8 per cent) beat the regional markets (2.5 per cent). It appears that growth is well and truly back for capital cities, as the impacts of the Coronavirus Pandemic are now wearing off.
How do mortgage repayments compare today?
The value of new home loans is up 67 per cent year-on-year, according to the latest ABS Lending Indicator figures for February 2021, released today. While these figures actually fell month-on-month, it still showcases the significant appetite Australians have for home loans and property now compared to 2020.
And the current low-rate environment has definitely played its role in fuelling the property market fire.
Between 31 March last year and today, the average variable owner-occupier home loan interest rate (paying principal and interest) has fallen 0.26 percentage points, according to RateCity research.
And despite median values increasing over $40,000 year-on-year, the ongoing drop in interest rates means that monthly mortgage repayments on a median-valued dwelling in Sydney and Melbourne are only around $100 more expensive today.
How average mortgage repayments in Sydney and Melbourne compare today versus 2020
|Sydney Median price||$882,849||$928,028||$45,179|
|Melbourne Median price||$695,299||$736,620||$41,321|
|Avg variable owner-occupier principal & interest rate||3.53%||3.27%||-0.26%|
|Monthly repayment in Sydney||$4,434||$4,532||$98|
|Monthly repayment in Melbourne||$3,492||$3,597||$105|
Source: CoreLogic.com.au, RateCity.com.au. Data accurate as of 01.04.2021. Does not factor in fees.