Australia’s housing market is on track to see values surpass pre-pandemic highs by early next year, as all capital cities return to growth.
The national house price index increased 0.8 per cent over November, according to CoreLogic’s latest housing market index, with all capital cities – including Melbourne – posting increases in value.
Canberra and Darwin recorded the highest increases, both up 1.9 per cent, while Hobart recorded value increases of 1.4 per cent on average. Adelaide values increased 1.3 per cent.
Melbourne, which was the slowest to recover, posted value increases of 0.7 per cent, followed by Brisbane’s 0.6 per cent growth and Sydney’s 0.4 per cent growth.
“The national home value index is still seven tenths of a per cent below the level recorded in March, but 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,” CoreLogic’s head of research, Tim Lawless said.
“The recovery in Melbourne, where home values remain 5 per cent below their recent peak, will take longer.”
CoreLogic noted that while Sydney and Melbourne values are close to where they were in early 2017, Perth values are closer to 2006 levels and Darwin at 2007 levels. The majority of the growth is being driven by rocketing Brisbane, Hobart, Adelaide and Canberra markets.
Caution for ‘surprising’ market
While the broader capital city markets are recovering, Lawless said question marks remain for Melbourne’s unit market.
“The resilience in Melbourne unit values is surprising given the high supply levels across inner city areas and the sharp decline in rental conditions,” Lawless said.
“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.”
CoreLogic said it expects inner city apartment precincts in Melbourne and Sydney will face weakened rental demand and high supply, with the outlook for this sector poor.
Australia’s regional markets continue to grow, with the combined regional markets index growing at twice the rate of the combined capital index.
Record low interest rates should continue to support buyer numbers, along with reforms to stamp duty taxes, CoreLogic said.
NSW recently announced it would significantly alter the state’s stamp duty system, which currently slugs the average Sydney homebuyer around $35,000.
While investor numbers remain low, CoreLogic predicts investors will return in the new year – although their attention may well be focused on regional markets as their lower prices and “arguably better prospects” become attractive.
The Reserve Bank of Australia will announce its monthly interest rates decision at 2:30pm AEDT on Tuesday.
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