Capital city price growth outpaced regional growth for the second time in 12 months in February, data from the new REA Insights Home Price Index released today shows.
According to the REA Insights Home Price Index data, which will be released monthly from today, national dwelling prices rose by 0.4 per cent nationally last month, taking them 1.8 per cent higher over the past three months and 5.9 per cent higher than they were in February 2020.
Property prices rose in each major region of the country in February, with the largest rises in Darwin (0.9 per cent) and regional Victoria (0.5 per cent) and the smallest growth in Brisbane and regional Queensland (both 0.1 per cent).
Over the past month, dwelling prices in capital city markets increased 0.4 per cent, compared to 0.3 per cent in regional areas. This contrasts with much of 2020, when regional areas experienced greater price growth.
Although the capital city housing markets have performed marginally better than the regions so far in 2021, REA Group Director of Economic Research and author of REA Insights Home Price Index Cameron Kusher said it was “still early days”.
“It’s only two months that we’ve seen that trend but I think it’s definitely something to watch,” Mr Kusher told Elite Agent.
“I think a lot of people that probably had the means to move to regional parts of the country have already done it, they’ve essentially had six months to do so.”
He said the other big factor at play was capital cities returning to some sense of normality “assuming there are no further lockdowns”.
“With the vaccine being rolled out, as events start to come back and businesses start to open back up again, I think people start to remember the lure of the capital cities and why most people have historically chosen to live in a capital city.”
He said the lure of regional Australia, with its lower property prices and desirable lifestyle remained strong, but those who intended to make a tree-or-sea-change may reconsider their regional move as cities reopen.
Mr Kusher said in the southern states in particular, outlying areas of the capitals such as the NSW Central Coast, outer west and Blue Mountains regions of Sydney and Victoria’s Mornington Peninsula had performed particularly well over the past 12 months.
“It’s still within the capital cities but it’s probably not the traditional areas that have been strongest and I think that’s a change that’s kind of flown a bit under the radar,” he said.
“But I think as vaccines roll out and things get back to normal, you will see those blue-chip areas becoming more popular and probably over the next 12-18 months, I think they’ll be some of the best performing in the capital cities in terms of capital growth.”
Mr Kusher said overall, rising consumer confidence had led to greater demand and resulted in hot market conditions and increased house prices.
“The record search activity on realestate.com.au that we have been monitoring over the last six months is now flowing through to pricing.
“Price growth in capital cities has been stronger than in regional markets over the past two months so it will be interesting to see if this trend continues as vaccines roll out in Australia and we head towards a new COVID-normal.”
House price growth (0.4 per cent) continued to outpace unit growth (0.1 per cent) in February, and over the past 12 months price growth for houses (6.9 per cent) was more than triple that of units (2.1 per cent).
But Mr Kusher said there were signs of a turnaround in the unit market, particularly in smaller cities.
“In Melbourne, the inner-city apartment market there has dramatically underperformed but if you look at Brisbane and if you look at some of the smaller capital cities, those apartment markets aren’t as reliant on overseas investors and overseas students renting those properties out as Sydney and Melbourne’s inner-city apartment market.”
He also said property prices had clearly responded positively to state and federal government housing stimulus and the lowest borrowing costs on record.
“The main potential bump in the road to recovery will be what happens as government and banking support is wound down over the coming months,” he said.
Although Mr Kusher acknowledged the winding back of JobKeeper and the increased JobSeeker payments may lead to a rise in forced property sales, he said he expected this increase to be small and predicted property prices would continue to rise.
“While the recovery in Sydney (0.5 per cent) and Melbourne (0.4 per cent) has been slow, prices are picking up and we expect to see this momentum continue in the coming months.”