According to Domain's quarterly House Price report, the average price for a house in Australia was just over $850,000 based on results from the December quarter. This was a sharp 4.1% jump during the three month period, and a healthy 5.8% rise in a year defined by a global pandemic. Every capital city except Darwin and Perth reached record levels, with buyers flooding the market in the last few months of 2020 since the end of the major lockdown period.
Sydney remains the most expensive market to buy a house at $1.2 million, followed by Melbourne at $936,073, Canberra at $855,530, Brisbane at $616,387, and Adelaide $574,264. Prices in Hobart were $564,091 at a record 12.4% year-on-year increase, with Perth values at $563,214, and Darwin at $533,845. At $852,940, the average national house price in December was much higher than the $819,112 value recorded in September, 2020; and the $806,360 value recorded in December 2019. ;
According to Domain's Senior Research Analyst Dr Nicola Powell, there was a stark difference between house and apartment prices, with the value of houses jumping exponentially and the value of units rising much more modestly: "National house prices reached a record high at the end of 2020... National unit prices increased a more modest 1.3 per cent over the December quarter to $574,245 and now are only 1.4 per cent below the mid-2017 peak and could surpass this high over the next quarter."
Despite record high prices, house values could rise much further in the months and years ahead. The current low interest rate environment is the key, with the RBA's quantitative easing program also continuing to lower borrowing costs. The bank has cut official interest rates by 1.15 percentage points since June, 2020, dropping from 1.25% to 1.0% in July before dropping time and time again to its current rate just above zero.
According to recent analysis by the RBA, house values could jump by a massive 30% over three years if borrowers believe the cut in interest rates is permanent. Instead, if people believe that ultra-low interest rates will remain on a temporary basis, real house prices are likely to rise by a much lower 10%. RBA governor Philip Lowe has already said that he does not expect the 0.1% cash rate to increase for "at least" three years.
According to Dr Powell, current conditions are likely to continue throughout 2021, with low rates likely to fuel further price rises in the years ahead: “The year 2020 ended with so many new records; the resilience of our market is pretty remarkable... With the historically low interest rates likely to stay for the near future, we’d expect this level of activity to continue, so we’ll see more price growth throughout 2021."