National housing values are still 14.8 per cent higher than they were at the start of the Covid pandemic, despite recent property value falls.
New figures from CoreLogic shows Australian property values initially declined at the start of the pandemic, followed by a record boom.
“The initial uncertainty around the pandemic, lockdowns, and a sharp decline in economic activity put downward pressure on residential sales and listings volumes, and home values fell 1.9 per cent between April and September of 2020,” CoreLogic Head of Research Eliza Owen said in the latest Property Pulse.
“This brief drop in housing values was followed by the sharpest upswing in home values on record.
“National dwelling values rose 28.6 per cent from September 2020 to April 2022.
An enormous, three-pronged monetary policy expansion, and stimulus payments of around $120 billion, helped to turn around a sharp decline in economic activity, and shift sentiment in favour of the housing market.
“Sales volumes surged, peaking at 619,915 in the 2021 calendar year.”
Between May last year and the end of February the market contracted, with national home values dropping 9.1 per cent to the end of February, which is the largest downswing on record.
“Annual sales volumes are down 21.5 per cent from a peak in December (2021). Despite the recent volatility, home values remain 14.8 per cent higher overall,” Ms Owen said.
Is the market stabilising?
But in recent weeks, Ms Owen said the market had shown signs of stabilising, with the rate of home value decline slowing to just 0.1 per cent in February.
Auction clearance rates are also higher than at the end of 2022.
“It may be too early to call the ‘bottom’ of the downswing due to further rate increases, and a looser labour market, expected in the coming months,” Ms Owen said.
“However, as the rate hiking cycle slows to a pause later this year, it is possible the housing market will revert to slower, steadier growth patterns.”
Different states, different markets
While the Home Value Index is still well above pre-Covid levels nationally, results vary by region.
The South Australian HVI has increased 47.6 per cent in the three years to February, while Melbourne values have virtually returned to pre-pandemic levels.
“In the past three years, Adelaide houses have come out on top across the capital cities, sitting 43.7 per cent higher than at the end of March 2020,” Ms Owen said.
“This is the equivalent of a $211,097 increase on the median house value across the city, which is currently sitting at $694,653.
“Such dollar value gains are much stronger than the equivalent median house value gain in Sydney (which has risen the equivalent of $119,830), and Melbourne house values have actually seen a decline since March 2020, down the equivalent of $1009 at the median house value level.”
Ms Owen attributed the “mixed bag” to high cumulative gains being more common in more affordable markets as well as migration trends and the relative return of various rental markets.
In the regional market values are still 30.7 per cent higher than at the onset of Covid, with values 10.4 per cent higher across the combined capitals.
“Net internal migration to regional Australia hit a record high of 44,674 people in the year to March 2021, according to provisional data from the ABS,” Ms Owen said.
“This was due to an uptick in internal arrivals from capital cities, as well as a marked drop-off in the volume of people leaving regional Australia relative to pre-pandemic trends.
While provisional internal migration data is only reported to March 2021, joint research from CBA and the RAI shows the ‘regional movers index’ declining from pandemic highs. According to the research, net migration from capitals to regions is still higher on average than pre-COVID levels, but has been trending down for the past two years.”
Houses over units
At the peak of lockdowns, buyers preferred houses compared to units, with the portion of residential sales that were houses peaking at 75.2 per cent in October 2020.
But that trend has since reversed.
“Toward the end of the HomeBuilder scheme in 2021, the portion of residential purchases that were houses have trended lower, and are currently back toward pre-COVID levels,” Ms Owen said.
“In 2022, there was also a peak in the premium on national house values relative to units.
“The median house in Australia reached a record 32.9 per cent above the median unit value.
“This has also since trended lower, with the median house value sitting 28.3 per cent higher in February 2023.”
The rental market
Initially, rent values dropped at the start of the pandemic, fallying 0.8 per cent through to August 2020.
But since then the growth in rent values nationally has climbed 23.1 per cent and as high as 35.4 per cent in Perth.