Australian home values rose in October

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After five months of falling housing values nationally they were on the rise again in October in every capital city but Melbourne, according to CoreLogic.

And there are a lot of good reasons for it according to CoreLogic’s head of research Tim Lawless:

  • – Historically cheap interest rates (and this is likely to continue as the RBA has just announced another cut in interest rates to a record low of 0.1 per cent and is not expected to increase for at least three years.)
  • – Rising consumer confidence (in October we saw an 11.9% surge in the Westpac-Melbourne Institute consumer sentiment index)
  • – Persistent low housing stock advertised for sale supports price growth

Other economists are also attributing price growth to:

  • – First homeowner grants adding a stimulus to that end of the market; and
  • – Travel restrictions have meant more people have the money to buy.

While dwelling values in Melbourne declines -0.2 per cent, they have seen a sharp rise if we compare to the -0.9 per cent decline last month and the -1.2 per cent decline over August.

Values in Sydney grew 0.1 per cent, following a -0.3 per cent September decline.

The best performing capitals over October were Adelaide and Darwin, both seeing 1.2 per cent growth, closely followed by Hobart and Canberra, both up one per cent.

Perth continued its recovery, up 0.6 per cent following 0.2 per cent September gains, while Brisbane was consistent with a further 0.5 per cent growth, the same as last month.

Houses vs Units

Nationally houses are performing better than units, with capital city house values rising 0.4 per cent over October compared with -0.2 per cent declines in units.

The biggest difference was in Sydney, where house values jumped 0.5 per cent and units contracted -0.5 per cent. 

Adelaide’s housing market (1.2 per cent) outperformed its units (0.9 per cent), as did Brisbane (houses +0.6 per cent, units -0.1 per cent) and Perth (houses +0.6 per cent, units +0.4 per cent)

CoreLogic’s head of research Tim Lawless says the October results show early evidence of a divergence between house and unit market performance.

“Through the COVID period so far, unit values have actually shown a smaller decline in values than houses, but this is likely to change.”

“Almost two thirds of Australian units are rented, and rental conditions have weakened, especially in the key inner city precincts of Melbourne and Sydney.

“These areas have a higher concentration of unit stock, and historic exposure to demand from overseas migration. Low levels of investment activity, relatively high supply of unit stock in inner-cities and international border closures are key factors that imply units will under-perform relative to houses over the medium term” Lawless added.

The rise of the regions

Remote working initiatives have continued to drive regional housing markets, particularly in regional cities within two hours’ commuting distance of their central business district.

In the seven months since March, regional dwelling values are up 1.7 per cent while values across the combined capitals index have fallen by 2.3 per cent.

In Queensland, the Gold Coast and Sunshine Coasts have become even more desirable for prospective homeowners with strong appetite for housing close to the coast itself and low supply has pushed up housing values.

Encouragingly, the easing of government restrictions in regional Victoria saw dwelling prices lift 1.5 per cent in North-West Victoria, 1.3 per cent in Bendigo, 0.9 per cent in Warrnambool & South-West Victoria and 0.8 per cent in Geelong.

“The newfound popularity of working from home is only one factor helping to support regional home prices,” Lawless said.

“More affordable price points, lower densities and lifestyle factors, are also under-pinning the relative strength across many regional areas of the country.”

Nationally, markets are now expected to pass through a trough across the first quarter of next year as government income support schemes and mortgage repayment moratoriums are eased, leading to an increase in defaults and distressed sales.

“Reopening, government incentives, low rates, and the escape from the city are dominating at present,” AMP Capital chief economist Shane Oliver said.

“[However] the hit to immigration, weak rental markets and high unemployment will weigh into next year, especially in inner-city Melbourne and Sydney, while houses in the outer regions and other cities will likely remain much stronger.”

Source: CoreLogic


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