Australia’s house prices have experienced the steepest increase in almost 18 years surpassing record highs, with Sydney and Canberra taking the title as the cities enjoying the fastest quarterly acceleration on record.
The Domain House Price Report for the March 2021 quarter reveals property affordability is being pushed further out of reach for many desperate to get into the market, especially for houses.
The report also reveals capital cities have outperformed regional areas for the first time in over a year.
According to the report, the national median house price increased for the second consecutive quarter for the first time since 2009, adding another 5.7 per cent in the first three months of 2021 to reach a new record of $899,509.
“Record growth has mostly been driven by the record-low interest rates, improved household savings, low listing volumes, post-lockdown lifestyle changes, returning cashed-up ex-pats, government incentives, and soaring consumer sentiment,” Domain’s senior research analyst Nicola Powell, said.
Let's take a closer look at the numbers themselves.
Domain House Price report: Median house prices for the March 2021 quarter
Canberra saw the largest quarterly increase in the median house prices, with a huge 9.7% rise to a median of $927,577.
This was closely followed by Hobart and Sydney where house prices enjoyed a 9.1% rise to $889,509 and an 8.5% rise to $1,309,195 respectively.
At the other end of the scale, Brisbane had the smallest quarterly increase of just 1.7% to $632,999, followed by a 2.4% increase to $578,612 in Perth.
Domain House Price report: Median unit prices for the March 2021 quarter
Meanwhile, for units, the report shows another story.
Perth, which was near the bottom of the list for house price increases, was at the top of the list for its units with the highest quarterly increase of 3.9% to $371,445.
This was followed by 2.2% increases in unit prices in both Sydney and Melbourne which saw their median prices increase to $751,038 and $568,793 respectively.
Meanwhile, there were four Australian cities where the median unit price fell over the quarter.
Canberra had the biggest decline of 5% to a new $473,304 median, while median prices for units in Darwin fell 1.8% to $293,731.
Elsewhere, the median unit price also fell in Hobart (0.8%) and Brisbane (0.5%).
What’s happening in each major market
Domain House Price report - capital city price growth
Sydney house prices soared 8.5% or $103,000 over the March quarter to a new record high of $1,309,195 in what is the fastest quarterly acceleration of house prices since Domain records began in 1993.
This has pushed annual house price gains into double-digit percentage growth, making it the steepest increase since the lead up to the previous price peak in mid-2017, at 12.6%.
All Sydney regions have hit record high house prices but houses at the upper end are leading the charge, with the strongest quarterly gains recorded in the eastern suburbs, northern beaches, Baulkham Hills and Hawkesbury.
The surge is good news for sellers looking to downsize, but the cost of upsizing remains a hurdle.
Meanwhile, for first-home buyers, low mortgage rates have improved the affordability of repayments, but saving for a deposit is a challenge due to rapidly rising prices, low wages growth, and low interest on savings.
Meanwhile, Sydney’s unit market continues to underperform in comparison.
Unit prices increased 2.2 per cent over the March quarter to $751,038, a marginal 0.2 per cent higher than the same time last year, although this is an improvement from the weaker performance across the previous three quarters.
“Owner-occupiers have been the driving force behind Sydney’s swift price leap thanks to ultra-low home loan rates, government incentives, and high household savings,” Powell says.
“Investors, who have been on the sidelines, have a renewed appetite and this could continue to support a recovery in unit prices.”
Strong buyer demand for houses means properties are not on the market long, and this has depleted overall supply to a multi-year low in supply.
But Powell says this rapid quarterly growth isn’t likely to continue at the same pace going forward.
Melbourne house and unit prices reached another new record over the first quarter of 2021 meaning that for the first time in a year housing prices in Melbourne have risen at a faster pace than regional Victoria.
House prices surged $45,000, or 7.3%, over the March quarter to $974,397.
And given the momentum that has built in the housing market, Melbourne’s median house price is likely to crack $1 million over the coming quarter.
In terms of areas, the Mornington Peninsula continues to be the standout performer with house prices leaping 16.6 per cent compared to last year.
Meanwhile, similarly to Sydney, units continue to underperform compared to houses with a 2.2% increase to $568,793 over the quarter.
Last year, Melbourne’s housing market recorded uneven price rises that were concentrated in middle and outer suburbs but the most recent report shows increases are now being recorded across most of Melbourne, led by housing prices in the inner east.
Melbourne’s CBD continues to be weak: unit prices are $30,000 below the mid-2017 price peak, offering negotiation opportunities for buyers.
“A perfect storm has been created to fuel housing demand - a combination of record low-interest rates, reduced discretionary spending, as well as state and federal housing incentives,” Powell says.
For Melbourne, conditions are exaggerated given residents have lived through multiple lockdowns which will undoubtedly have spurred homeowners to rethink lifestyle choices, bring forward decisions, or even readjust housing needs, resulting in booming levels of home loans financed.
House prices in Brisbane have risen modestly for seven consecutive quarters, up a further 1.7 per cent over the March quarter and 6.2% year on year to $632,999.
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But Brisbane still has a two-speed market, with unit prices falling over the quarter and year, down 0.5 per cent and 1.1 per cent lower respectively.
The divergence of house and unit prices has made the value gap between purchasing a house and unit the largest on record.
By area, the Gold and Sunshine Coasts continue to be standout performers, although the pace of price acceleration appears to be easing on the Gold Coast.
South-east Queensland's housing market has become increasingly popular to interstate buyers looking for a “more affordable” investment option outside of their own backyard with the number of Australians relocating to the sunshine state at its highest level since 2006.
“COVID-19 has been the driver of change, accelerating an exodus from the larger cities of Sydney and Melbourne, and shifting residents across state borders - Queensland has been the population winner,” Powell says.
“Changed lifestyle preferences post-lockdown and the option of remote working has driven demand to south-east Queensland as buyers are drawn by affordability, liveability, climate and greater value for money.”
Adelaide house prices had the steepest annual rise since mid-2010 at 10.4%, and a 3.7% quarterly increase to $599,706.
The growth was led by Adelaide’s central and hills area, as well as Adelaide south which is the only area to record double-digit annual growth at 11.6%.
Adelaide is the third most affordable city to purchase a house, behind Perth and Darwin and for the first time on record, it is now more affordable to purchase a house in Adelaide than Hobart.
Adelaide’s unit market meanwhile rose 1.1% over the quarter to $344,062 but the pace of quarterly growth appears to be slowing compared to the acceleration in unit prices seen in early-2020.
Interestingly, for both houses and units, Adelaide’s current sale transactions are at the highest volume since 2007 with the flow of new listings unable to keep up with buyer demand, creating competition that the market has not experienced in some time.
“Adelaide has always largely been an owner-occupier driven market, therefore less exposed to the retreat of investors. That said, investors are starting to return, and the lower purchasing price, tight rental market, and ending of the rental moratorium could draw more investment activity to South Australia,” Powell says.
“Interstate migration has been a constant drain on housing demand, however, the stark turnaround has netted a positive flow of residents into South Australia for two consecutive quarters - the first half-year rise in almost three decades.”
Canberra has enjoyed the most impressive data over the quarter with a surge of 9.7% rise to a median of $927,577, cracking the $900,000 mark for the first time in what is the fastest acceleration recorded since records began in 1993.
This has pushed annual house price gains to 19.5 per cent, the steepest annual increase in 17 years.
Houses at the upper end of the market are leading, with the strongest quarterly gains recorded in North Canberra, South Canberra, and Woden Valley.
All three areas have a median above $1 million, a higher average wage, job security, and low mortgage rates which has spurred buyers to upsize.
Median unit prices, however, declined 5% over the March quarter, to $473,304, 2.8% higher than the same time last year.
But the unit market is not uniform across the territory, with apartments in Gungahlin, South Canberra, and Tuggeranong growing over the quarter and year.
Another quarter at the same growth rate would push house prices above $1 million, but Powell expects that this rapid growth is likely to be the peak quarterly rate and not sustained in following quarters at such ferocity.
A lack of houses for sale at a time of strong demand has ultimately created stiff competition between buyers, depleting overall stock to a multi-year low.
Meanwhile, record low-interest rates, high household savings, low stock volumes, and incentives are fuelling a strong housing market performance.
Perth house prices rose 2.4% over the March quarter, the fourth consecutive quarter of growth while units notched a third consecutive quarter of growth, up 3.9% in what is an uninterrupted run of price growth not seen since 2013.
Houses remain $37,000 lower and units $50,000 lower than the 2014 record highs but the price gap is rapidly closing, although Domain suggests it would take another three consecutive quarters for houses, and four for units, at the exact same pace of growth to surpass the 2014 high.
“Record low home loan rates, generous government incentives, improved consumer sentiment has boosted buyer confidence - the same factors supporting market activity across all capital cities,” Powell says.
But what sets Perth apart is the affordability factor, with homeowners aware prices are below peak but rising, creating pressure to purchase before they accelerate too far.
Border closures will have also impacted Perth given the number of interstate and overseas workers who have relocated during the pandemic.
But now that the state government rental moratorium on evictions and rental hikes has ceased, investor participation is likely to continue to rise.
House prices soared 7.6% over the March quarter to $601,567 in what is the steepest quarterly jump since 2017.
This has pushed annual gains 15.9% higher, the biggest jump since 2018.
And house price growth is accelerating - at the end of 2019 Hobart was the most affordable capital to purchase a house but prices have now leaped past Adelaide and remain more expensive than Darwin and Perth.
Unit prices however declined 0.8% over the March quarter to $430,716 representing a diverging pace of growth with houses far outperforming.
“While construction has picked up, supply remains a fundamental issue that continues to support price growth. The local lifestyle and successful control of the pandemic, as well as the desire for lower density living, will continue to place Hobart in the spotlight,” Powell says.
House prices in Darwin jumped 9.1% over the March quarter to $554,295, the steepest quarterly rise since 2009.
Unit prices fell 1.8% to $293,731 over the period but are still 20.2% higher year-on-year.
Prices in Darwin have adjusted quickly over the past year following a multi-year downturn, however, houses remain $124,000 below the 2013 peak and units $193,000 lower than the 2016 high.
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