Australian home values continued to grow in February 2021, leading to the largest month-to-month improvement in almost 20 years, according to CoreLogic.
February saw a 2.1% surge on January, the highest that the CoreLogic national home value index has registered since August 2003.
Growth was driven predominantly in Sydney and Melbourne, but everywhere in Australia saw improvement.
“Normally we judge sustainability in housing markets its on how are prices rising in line with incomes,” said CoreLogic’s research director, Tim Lawless. “And clearly on that measure, this is unsustainable, as we aren’t expecting wages to be rising any time soon.”
“Household incomes have been relatively strong through 2020 due to a lot of fiscal support but that’s obviously winding down now as well, so long story short, we aren’t expecting that such a rapid rate of appreciation can be sustained for much longer, but we are seeing housing values in the two most unaffordable markets, Sydney and Melbourne, lower than they were pre-COVID.”
“So I think the market still have some legs, though I don’t see a lot of momentum building from here because the rate of growth is already extremely rapid, but I think we’ll see values rising at least until the end of this year and well into the next year, driven by extremely low rates and improving economic conditions.”
Lawless said that there were three key factors driving the current appreciation in house prices. “Clearly, very low mortgage rates are one of the main factors, with those being as low as they are has very much stoked consumer demand, but on top of that we have that the economy is improving much more rapidly than what was forecast,” he said.
“That has bled through to improved consumer sentiment. If you look at any of the consumer sentiment measures, they’re well above pre-COVID levels. It means that consumers are more willing and able to make high commitment decisions, which is so important for housing because of the large purchase price.”
“On top of that, you’ve got this rise in demand against a backdrop of extremely low supply levels. We’ve seen listing numbers tracking 26% lower than a year ago, but buyer demand is about 35% higher. So there’s a mismatch between demand and supply that is creating some urgency and supporting this upwards growth on prices. I think those three things combined have created a synergy.”