The signs Australia’s property market has entered a boom were all but confirmed this month with a report showing housing prices had staged their strongest monthly rise in nearly two decades.
“Spurred on by a combination of record low mortgage rates, improving economic conditions, government incentives and low advertised supply levels, Australia’s housing market is in the midst of a broad-based boom,” said the property data firm CoreLogic, after its national home value index increased at its fastest rate since 2003 in February.
With dwelling values across the country rising 2.1 per cent in February, Sydney was the strongest performing capital city with prices up 2.5 per for the month, according to CoreLogic.
CoreLogic’s research director Tim Lawless said: “The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fuelled buyer demand.”
Blast off in property market
The real estate services group Domain reported Sydney’s auction clearance rate for February was now at its highest point since 2015, and still rising fast.
“The monthly result is 8.3 percentage points higher than December, and 8.6 percentage points above last year,” noted Domain’s Senior Research Analyst Dr Nicola Powell.
Meanwhile, Westpac’s index for price expectations has surged to a new seven year high, with NSW staging the strongest gains in March.
“The Index is a better lead indicator of the confidence of investors, whose presence in the early stages of the current housing boom has been overshadowed by owner occupiers,” noted Westpac’s Chief Economist Bill Evans in a report which also noted that the bank’s gauge for consumer confidence was at a 10 year high.
Apartment supply continues to slow
Meanwhile, the supply of new apartments continues to slow.
The Australian Bureau of Statistics this month reported that while approvals for new houses were up 38 per cent in the year to the end of January, they were down 22.7 per cent for apartments. For January, the monthly fall for apartment approvals was an even sharper 39.5 per cent.
The off-the-plan (OTP) apartment market is now down 70 per cent from its 2015 peak, according to the Urban Development Institute of Australia. The UDIA reported unit completions have now fallen for three straight years.
The property advisory group Charter Keck Cramer has for months said this sharp decrease could result in an under-supply of apartments in Sydney into the medium term.
“The extent of the decline in aggregate supply and long lead time to restart the construction pipeline suggests that the market could quickly move into undersupply once current stock is soaked up. This will place upward pressure on rents, yields and prices, which in turn should kick-start OTP demand,” said Charter Keck Cramer’s national director for research Rob Burgess.
Fear of Missing Out
For many hopeful homeowners, the combination of strong sales, high auction clearance rates, rising prices and limited stock is the signal that it’s time to get serious about securing a property. Competition for limited available stock is increasing and first-home owners in particular will want to be looking for well-located and well-priced stock before prices rise further.