Property Growth at 30 Year High

May 14th, 2021
Australians are accustomed to strong house price growth, with prices having risen fairly steadily over many decades. The current situation is a little more pronounced, however, as ultra-low interest rates and strange economic times help to inspire the most growth since the 1980s. According to data from CoreLogic, national home value rose 6.8% in the April quarter, which is the highest growth since 1988.

The total value of Australia’s residential real estate has reached a massive $8.1 trillion. According to figures from Domain, the Sydney market recorded its biggest quarterly increase in almost 30 years, with 8.5% growth leading to a median house price of $1.31 million. Other capitals also recorded very impressive growth during the quarter, including Melbourne with 4.8% growth, Canberra with 9.7% growth, Darwin with 9.1% growth, and Hobart with 7.6% growth.

According to CoreLogic head of research Eliza Owen, “The Australian dwelling market has reached fresh record highs for the past four months, but the end of April marked the first time the total value of Australian housing broke the $8 trillion dollar mark. This puts Australian residential property at around four times the size of Australian GDP, and around $1 trillion more than the combined value of the ASX, superannuation and commercial real estate stock combined."

Much of this growth is due to the return of investors. According to data from the Australian Bureau of Statistics (ABS), the value of mortgage commitments for first home buyers dipped nearly 1% in March to $6.8 billion, with new home loans for investors jumping by almost 13% to $7.8 billion. While first time buyers have been a major driving force in this boom, there is a very real danger that current house price growth will leave people out in the cold.

According to Eliza Owen, “For many Australians looking to get a foot on the property ladder, the continued strength in the market is putting home ownership further out of reach despite record low mortgage rates. Wages growth simply isn’t keeping pace.” The current level of property growth is thought by many to be unsustainable, which is having a direct impact on confidence across the community.

According to the latest Property Positivity Index by Finder, confidence in the property market is currently down after having a roller coaster 12 months. While “Both the rock-bottom cash rate and FOMO (fear of missing out) have turbocharged prices" and 74% of survey respondents thought that prices in their suburb would continue to rise over the next 12 months, "fears of a property bubble are making many Aussies pessimistic that now is the time to buy.”