Falling property prices are on their way to recovering after every city and country town posted gains in November, a first in seven straight months since the COVID-19 pandemic.
Australian homes grew an average of 0.8 per cent in value in the month of November, according to CoreLogic’s Home Value Index, marking a return to growth after sliding 2.1 per in the five months to September.
“If housing values continue to rise at the current pace, we could see a recovery from the COVID-19 downturn as early as January or February next year,” Tim Lawless said, head of research at CoreLogic.
“The recovery in Melbourne, where home values remain 5 per cent below their recent peak, will take longer.”
The national average offers a clean, rounded number on the state of the property market, but the reality during the pandemic is spotty and inconsistent. Sydney, Melbourne, Perth and Darwin property values are far from their historical peaks, for instance, while Brisbane, Adelaide, Hobart and Canberra all set price records in November.
But experts studying the market are generally optimistic, even with the uncertain fate of a pandemic looming over the country.
House values drag the average up as unit values are down
Rising house values have more than offset the losses incurred by the falling unit market. National house values lifted by 1.1 per cent over the last three months, while units in capital cities actually dropped by 0.6 per cent.
“This trend towards stronger conditions in … housing markets is evident across most of the capital cities,” Mr Lawless said.
“Relative weakness in the unit market can be attributed to factors including low investment activity, higher supply levels in some regions, and weaker rental market conditions across key inner city unit precincts.”
Melbourne’s unit market, having endured one of the longest lockdowns in the world and largely affected by a lack of migration, proved surprisingly resilient, dropping less than expected in value and bouncing back quicker.
“We suspect the stronger trend in Melbourne unit values relative to houses could be short-lived,” Mr Lawless said, “unless overseas migration turns around sooner than expected which would help to shore up rental tenancy demand.”
Country homes grew twice as quick as city ones
Homes in country areas are growing in value at twice the speed of homes in city centres, CoreLogic said. Whereas capital city homes grew by 0.7 per cent in November, regional ones gained 1.4 per cent.
Changing lifestyles brought about by the COVID-19 pandemic, where working from home and social distancing is encouraged, have contributed to the shift, Ryan Felsman said, senior economist at CommSec.
“Idyllic beachside and semi-rural towns are being transformed by Sydneysiders and Melburnians keen to relocate or buy a second property, enabled by flexible working arrangements,” he said.
“The stampede to buy coastal properties and rural lifestyle blocks have pushed up home prices across regional Australia.”
Data from the Australian Bureau of Statistics (ABS) illustrates the extent of shifting demand. During the June quarter, when international and domestic border restrictions were generally in place, 5964 people moved away from Sydney and 7957 moved away from Melbourne.
This shift towards regional homes led to them growing at their quickest pace in 16 years, Mr Felsman said.
Future signs look good, but concerns remain
There’s plenty of signs indicating the property market is bouncing back, but experts warn the unresolved pandemic could complicate things.
Helping buoy home values is a high level of demand. CoreLogic’s data indicates there’s more buyers than there are properties for sale, which is fuelling competition and driving up prices.
Other good omens include four months of steady sale numbers, improving auction markets and increasing home values, the research firm said.
But because of the pandemic, the relief measures in place and the changing climate, the future outlook remains unclear, Shane Oliver said, chief economist at AMP Capital.
“(But) the overall outlook into next year remains messy with a high risk that the negatives around weak rental markets and the collapse in immigration could reassert themselves particularly in inner city Melbourne and Sydney.
“The outlook is also widely divergent across cities, within cities and across units versus houses.”
Cheap mortgages, payment deferrals and government payments are making housing affordable for most people, but it’s also true there’s an increasing number of people who are struggling to make ends meet.
The number of people struggling to repay their mortgage has more than doubled since the early days of the pandemic, the ABS said, as unemployment remains high and loan deferrals come to an end.
Analysts have also acknowledged mortgage delinquencies -- that is, the number of mortgage repayments more than 30 days late -- have generally gone up too.