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House prices record steepest quarterly rise in 18 years

Australian house prices recorded their strongest quarterly gain in almost two decades in the three months to March, according to the latest Domain House Price Report.  

According to the report, house prices in all capital cities except for Perth and Darwin hit record highs in the March quarter. 

“Nationally, house prices reached a record high over the March quarter of $899,509,” Domain’s Senior Research Analyst Dr Nicola Powell said.

“The 5.7 per cent quarterly gain is the steepest rise in almost 18 years, with all capital cities posting growth.”

Dr Powell said this also represented the first time house prices had risen in all capitals simultaneously for two consecutive quarters since 2009. 

National unit prices have also risen to $584,340, just above the previous price peak reached in mid-2017. 

The 8 per cent drop from mid-2017 to early 2019, as well as the 2.1 per cent COVID decline in mid-2020, have now been recouped. 

Dr Powell said a range of factors, including record low interest rates, improved household savings and low listings had combined to propel the booming market.

“Post-lockdown lifestyle changes, consumer sentiment roaring to an 11-year high, returning cashed-up expats and government incentives have fuelled demand for housing and a strong market performance,” Dr Powell said.

“It is the first time in a year that price growth across the combined capital cities has outperformed regional areas.” 

Sydney and Canberra recorded the fastest quarterly increases for house prices in almost 30 years, but the report concluded the rapid rate of quarterly growth was unlikely to continue. 

Sydney units continue to underperform compared to houses, and these will remain a more attainable option for first home buyers.

Melbourne’s house and unit prices reached a new record high, with the median for houses likely to surpass $1 million in the next quarter.

Increased demand has been led by owner-occupiers but investors have started to make a comeback and this could further fuel more price hikes in the coming quarters.

Sydney

“Sydney house prices soared to a new record of $1,309,195 after jumping $103,000 over the March quarter, or 8.5 per cent,” Dr Powell said.  

“This is the fastest quarterly acceleration of house prices since Domain records began in 1993.”

The March-quarter rise pushed annual house price gains into double-digit percentage growth (12.6 per cent), making it the steepest increase since the lead-up to the previous price peak in mid-2017.

Dr Powell said houses at the upper end were leading the charge, with the strongest quarterly gains recorded in the eastern suburbs, northern beaches, Baulkham Hills and Hawkesbury regions.

“All Sydney regions have hit record high house prices,” she said.

“Over the past three decades, Sydney house prices have twice increased by more than 8 per cent over a quarter, the first time in June 2015.

“This outcome highlights the rarity of such a significant quarterly gain, presenting unique conditions for buyers and sellers. For homeowners, this is the fastest rate of capital growth on record.

Sydney houses

Dr Powell said although low mortgage rates have improved the affordability of repayments for first-home buyers, saving for a deposit is a challenge due to rapidly rising prices, low wage growth and low interest on savings.

“There is a clear compositional difference in Sydney’s housing rebound: units continue to underperform compared to houses, although the outlook has improved. Unit prices increased 2.2 per cent over the March quarter to $751,038, a marginal 0.2 per cent higher than the same time last year. This is a turnaround following the weaker performance across the previous three quarters.”

“Owner-occupiers have been the driving force behind Sydney’s swift price leap thanks to ultra-low home loan rates, government incentives and high household savings.

“Investors, who have been on the sidelines, have a renewed appetite and this could continue to support a recovery in unit prices.”

Dr Powell said this rapid quarterly growth was unlikely to continue.

“Prices will still grow but it is unlikely to stay at such sustained growth rates over each quarter.”

Melbourne

“Melbourne house and unit prices reached another new record over the first quarter of 2021,” Dr Powell said. 

“For the first time in one year, housing prices in Melbourne have risen at a faster pace than regional Victoria. House prices surged $45,000 or 4.8 per cent over the March quarter to $974,397, a 7.3 per cent annual increase.”

Dr Powell said given the momentum of the market, Melbourne’s median house price was likely to crack $1 million over the coming quarter.

“It will take just over half of the percentage growth recorded over the March quarter to achieve this milestone,” she said.

House prices across all Melbourne regions are now at record highs, with the Mornington Peninsula the standout performer, with house prices increasing 16.6 per cent year-on-year.

Dr Powell said units continued to underperform compared to houses, but unit prices had hit a new record following a 2.2 per cent rise over the March quarter to $568,793.

“Last year, Melbourne’s housing market recorded uneven price rises that were concentrated in middle and outer suburbs,” Dr Powell said.

Melbourne houses
Melbourne property values have hit a new peak.

“Increases are now being recorded across most of Melbourne. Of particular note, houses in the inner east are now leading quarterly growth. Melbourne’s CBD continues to be weak: unit prices are $30,000 below the mid-2017 price peak, offering negotiation opportunities for buyers.”

“A perfect storm has been created to fuel housing demand – a combination of record low interest rates, reduced discretionary spending, as well as state and federal housing incentives.”

Dr Powell said in Melbourne, conditions are exaggerated due to the extended lockdowns the city faced.

“This will undoubtedly have spurred homeowners to rethink lifestyle choices, bring forward decisions or even readjust housing needs, resulting in booming levels of home loans financed. While this has been led by owner-occupiers, investors have started to make a comeback,” Dr Powell said.

Brisbane

“Greater Brisbane house prices are at a new record high at $632,999,” Dr Powell said.

“House prices have risen modestly for seven consecutive quarters, up a further 1.7 per cent over the March quarter.

House values in the Queensland capital are currently 6.2 per cent higher than the same time last year.

“Brisbane still has a two-speed market, with unit prices falling over the quarter and year, down 0.5 per cent and 1.1 per cent lower respectively,” Dr Powell said.

Brisbane

“Affordability has improved for buyers who are paying a multi-year low for a unit at $398,612. The divergence of house and unit prices has made the value gap between purchasing a house and unit the largest on record.”

Dr Powell said the Gold and Sunshine Coasts continued to be standout performers but said the pace of price acceleration appeared to be easing on the Gold Coast.

“Sunshine Coast house prices increased 6.9 per cent over March to $770,000, a staggering 19.4 per cent higher than one year ago,” Dr Powell said.

“Units on the Sunshine Coast jumped 10.2 per cent over the quarter to $550,000, 18.3 per cent higher than last year. This is the quickest rate of price increases in roughly 17 years.”

Gold Coast houses hit a new record high at $749,950 following a 4.2 per cent quarterly increase. Unit prices on the Gold Coast weakened 1.2 per cent over the quarter to $479,400.”

Dr Powell said southeast Queensland’s housing market had become increasingly popular with interstate buyers.

“The number of Australians relocating to Queensland from other states is at its highest level since 2006,” she said.

Adelaide

“Adelaide house prices are at a new record high at $599,706, rising 3.7 per cent over the March quarter,” Dr Powell said.

“This has resulted in the steepest annual gain since mid-2010, at 10.4 per cent.”

Dr Powell said Adelaide was the third most affordable city to purchase a house, behind Perth and Darwin.

“For the first time on record, it is now more affordable to purchase a house in Adelaide than Hobart,” she said.

“Adelaide unit prices increased a 1.1 per cent over the quarter to $344,062, 6.9 per cent higher than the same time last year.”

Adelaide’s market has experienced less disruption than other capitals during the pandemic.

Dr Powell said the pace of quarterly growth appeared to be slowing compared to the acceleration seen early last year.

“Overall, there has been minimal disruption to Adelaide’s property market through the pandemic relative to other capital cities.”

“That said, investors are starting to return, and the lower purchasing price, tight rental market and ending of the rental moratorium could draw more investment activity to South Australia.”

Perth

“Perth house prices have now reached the highest point in just over five years and unit prices the highest in almost three years, at $578,612 and $371,445 respectively,” Dr Powell said.

She said Perth was now one year into a recovery, following a five-year downturn.

House prices rose 2.4 per cent over the March quarter, the fourth consecutive quarter of growth. Units notched a third consecutive quarter of growth, up 3.9 per cent.

“This uninterrupted run of price growth has not occurred since 2013 in the lead-up to the previous price peak reached in 2014,” Dr Powell said.

“Houses remain $37,000 lower and units $50,000 lower than the 2014 record highs, with the price gap rapidly closing.”

Dr Powell said it would take a further three consecutive quarters at the same pace of percentage growth as the March quarter for house prices to surpass the 2014 high, and four consecutive quarters for units.

“Setting Perth apart is the affordability factor, with homeowners aware prices are below peak but rising, creating pressure to purchase before they accelerate too far,” she said.

“Now that the state government rental moratorium on evictions and rental hikes has ceased, investor participation is likely to continue to rise.”

Hobart 

“Hobart house prices are at a new record high, breaking $600,000 for the first time,” Dr Powell said.

House prices soared 7.6 per cent over the March quarter to $601,567, which is the steepest quarterly jump since 2017.

“This has pushed annual gains 15.9 per cent higher, the biggest jump since 2018,” she said.

Dr Powell said it appeared as though price growth was still accelerating in the Tasmanian capital.

“At the end of 2019 Hobart was the most affordable capital to purchase a house. Hobart house prices have now leaped past Adelaide this quarter, and remain more expensive than Darwin and Perth.

“All regions across Hobart recorded quarterly and annual house price growth.”

Hobart

“Houses and units continue to see a diverging pace of growth, with houses far outperforming. Unit prices declined 0.8 per cent over the March quarter to $430,716.

“Inner Hobart units are the only region to fall annually, highlighting the weaker performance of previous quarters.”

Dr Powell said over the past five years, house and unit prices had risen 73 per cent and 67 per cent respectively, surpassing all other capital cities.

Canberra

“The start of 2021 has provided some record breaking outcomes for Canberra,” Dr Powell said.

“Over the March quarter house prices surged by 9.7 per cent to $927,577. This is the fastest acceleration of house prices over a quarter since Domain records began in 1993 and the first time they have cracked the $900,000 mark.”

The March quarter growth has pushed annual house price gains to 19.5 per cent, which is the biggest annual increase in 17 years.

Canberra

Canberra’s unit market declined 5 per cent over the March quarter, to $473,304, but that figure is 2.8 per cent higher than the same time last year.

Dr Powell said another quarter at the same percentage growth rate would push house prices above $1 million in the nation’s capital.

“That said, this rapid growth is likely to be the peak quarterly rate and not sustained in following quarters at such ferocity,” she said.

Darwin

“Darwin’s housing market performance pivoted mid-2020. Following a multi-year downturn, prices began to improve,” Dr Powell said.

“For houses, this recovery continued and prices have hit the highest point since late 2017. House prices jumped 9.1 per cent over the March quarter to $554,295, the steepest quarterly rise since 2009.

Darwin

Unit prices declined 1.8 per cent over the quarter to $293,731 but are 20.2 per cent higher compared to last year, a rate of growth not seen since 2009

“Buyers will find prices have adjusted quickly over the past year, however houses remain $124,000 below the 2013 peak and units $193,000 lower than the 2016 high,” Dr Powell said.

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