According to CoreLogic’s latest research, housing demand continues to rise due to the broad range of stimulus measures and changes in market sentiment.
CoreLogic’s national index recorded a second consecutive monthly rise in November, with dwelling values up 0.8 per cent over the month. This follows the 2.1 per cent overall drop in Australian home values between April and September.
Head of Research Tim Lawless has suggested if the current trend persists we are likely to see the CoreLogic index surpass pre COVID Levels in early 2021.
Supporting this trend is record low-interest rates, improving economic conditions and containment of the virus which appear to have lifted consumer sentiment; along with State government incentives such as proposed changes to stamp duty and building grants supporting increased demand.
“If housing values continue to rise at the current pace we could see a recovery from the COVID downturn as early as January or February next year,” said Mr Lawless.
“The recovery in Melbourne, where home values remain 5% below their recent peak, will take longer.”
Although housing values look set to surpass their pre-COVID highs early next year, both Sydney and Melbourne home values remain at levels similar to those seen in early 2017.
While rising, Perth values are similar to mid-2006 levels, whilst Darwin values are in line with 2007 levels.
At the other end of the spectrum, housing values moved to new record highs in Brisbane, Adelaide, Hobart and Canberra through November.
Houses vs Units
House values have driven gains in the combined capitals index over the past three months, rising 1.1 per cent, and while the rate of decline has eased, capital city unit values fell by 0.6 per cent over the same period.
Melbourne’s unit market is the exception, where unit values have recorded a smaller than expected decline throughout the COVID period to-date and a more substantial recovery trend over recent months.
“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,” Mr Lawless said.
“The resilience in Melbourne unit values is surprising given the high supply levels across inner city areas and the sharp decline in rental conditions. We suspect the stronger trend in Melbourne unit values relative to houses could be short-lived unless overseas migration turns around sooner than expected which would help to shore up rental tenancy demand,” Mr Lawless added.
Regions remain strong
The stronger performance across regional areas of Australia continued in November, with CoreLogic’s combined regionals index recording a monthly growth rate double that of the combined capitals.
Regional home values were up 1.4 per cent in November
Regional Queensland has led the rise in values over the past three months, posting a 3.2 per cent lift, followed by regional NSW where values are up 3.1 per cent
Other indicators show positivity
The lift in housing values comes as a range of other indicators point to a further improvement.
Stock levels remain low across Australia, favouring sellers over buyers. The number of properties advertised for sale remains 20 per cent lower than this time last year, and 24 per cent below the five-year average. This is despite a sharp rise in fresh stock being added to the market.
The number of settled sales has held reasonably firm since July, with rising sales activity outside of Victoria offsetting the sharp drop in Victorian home sales caused by the recent lockdown period.
Nationally, CoreLogic’s settled sales estimates over the past three months were about 1 per cent higher than the same period last year. This is partially due to strong performance in regional areas, where buyer activity has seen a more significant lift than their capital city counterparts.
Auction markets have strengthened as well, with November clearance rates holding around 70 per cent, well above the decade average of 61 per cent. The strength in auction clearance rates comes as the number of auctions is expected to see a further lift in the first two weeks of December. This will provide a timely test of the market depth prior to the seasonal slowdown through late December and January.
Days on Market
Private treaty measures are also tightening, reflecting a market that is rebalancing towards vendors over buyers. The median selling time has reduced from 57 days in June to 42 days in November and discount rates have reduced from 3.9% in April to 2.8% in November.
Rental markets tighten even further in some areas
Overall, the recovery trend has been led by owner occupiers, but now that capital gain prospects are becoming firmer investor numbers could become more substantial in 2021.
Across the combined capitals, unit rents have fallen by 5.4 per cent since March while house rents have increased by 1.1 per cent. Most of the weakness in rental market conditions is emanating from Melbourne and Sydney where unit rents are 6.6 per cent and 7.6 per cent lower respectively since March.
Rental returns between houses and units continued to diverge through November, with capital city house rents 0.7 per cent higher in November while unit rents were down 0.6 per cent.
Perth and Darwin are showing the tightest rental markets, following years of weak rental conditions and little in the way of new rental additions to the market.
House rents across Perth have surged by 6.6 per cent since March whilst Darwin has increased by 6.1 per cent. Unit rents are also rising in these capital cities, up 3.9% and 5.3% respectively.
Hobart has recorded a large drop in rents, following a multi-year surge in rents prior to COVID. Although Hobart rents remain lower relative to March, the November data shows a 1.0 per cent rise in both house and unit rental rates. CoreLogic say this may be an early sign that rental markets are tightening as state borders re-open and labour market conditions improve.