The Australian housing market has increased by 0.9 per cent in January, taking it to a fresh record high and the scene is set for continued increases.
Prices grew fastest in Darwin, where values soared 2.3 per cent in January, followed by Perth and Hobart where values both rose 1.6 per cent, the latest house price index from CoreLogic revealed on Monday.
Values in Canberra rose 1.2 per cent, followed by Adelaide and Brisbane where values rose 0.9 per cent. Sydney and Melbourne had the slowest growth, increasing 0.4 per cent.
Regional markets also outperformed, growing 1.6 per cent in January, compared to the 0.7 per cent in the combined capitals.
Across the country, home values are now 1.0 per cent higher than their pre-COVID levels.
CoreLogic research director Tim Lawless said the strength of regional markets is tied to lifestyle changes as those in Sydney and Melbourne depart for regional life, pushing up prices in regional areas and lightening demand in those capital cities.
“This demographic trend is further compounded by the demand shock of stalled overseas migration. As Melbourne and Sydney historically receive the vast majority of overseas migrants, these metro areas have been the hardest hit by this demand shock,” Lawless said.
“Better housing affordability, an opportunity for a lifestyle upgrade and lower density housing options are other factors that might be contributing to this trend, along with the new found popularity of remote working arrangements.”
More price increases in future
While buyer activity is increasing, the volume of new homes on the market is not. The number of new listings in the four weeks to 24 January was 3.3 per cent lower than this time last year and 13.3 per cent lower than the five-year average.
Melbourne and Perth were the only capital city markets to diverge from this trend, with new listings up a huge 20.8 per cent in Melbourne and 2.2 per cent in Perth on last year.
“Melbourne vendors may still be playing catch-up from the earlier lockdown period, while in Perth vendors seem to be relishing the best selling conditions seen in many years,” Lawless said.
Collectively, however, the total amount of homes on the market is significantly lower than 2020 and close to record lows.
Total listing numbers across the country are 27.8 per cent lower than in 2020 and 29.3 per cent below the five-year average.
“With housing activity continuing to rise at above average levels while listing numbers remain well below average, the natural consequence is upwards pressure on housing prices,” Lawless said.
“Advertised supply levels are low while demand is strong. This is a seller’s market, but for some reason we are still seeing below normal vendor numbers across most markets. With sentiment rising and selling conditions favouring the vendor, it is reasonable to expect new listing numbers will rise as the year progresses which may help to temper housing market conditions.”
He said an increase in listing numbers in January will typically trigger more listings within a few weeks.
“We are expecting to see new advertised stock levels rising substantially though early February, well above last year’s levels.”
$1 million prediction
CoreLogic’s January report comes as economists predict home values in Sydney will increase by as much as $53,305 in 2021, to hit an average price of $1.03 million.
“The market is surging on the back of low rates, government stimulus, and Aussies having more in their savings accounts on average,” Finder insights manager Graham Cooke said.
“We expect this to continue through 2021, but Perth’s snap lockdown is a reminder that things can change quickly.”
The Reserve Bank of Australia will meet on Tuesday to discuss the interest rate.
Sign up to Yahoo Finance’s 6-week financial bootcamp here and master your money in 2021.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to the free Fully Briefed daily newsletter.