The Australian property market just recorded its highest rate of annual price growth since September 2003, at 16.4 per cent.
Notably, in the last six months alone, the Australian property values went up by 10.6 per cent. The residential property price index released by the Australian Bureau of Statistics (ABS) shows that for the three months up to June 2021, the residential property prices rose 6.7 per cent.
Every capital city in Australia has recorded a rise in property values. The property prices in Canberra are up by 8.2 per cent, Sydney is up 8.1 per cent and Hobart is up 6.3 per cent.
Cities like Perth and Darwin which have recorded modest gains or decreases in residential property prices also experienced a boom in the June quarter. Perth jumped 4.8 per cent while Darwin jumped 4.6 per cent.
The rising house prices seen in the capital cities are for the attached dwellings like apartments and units. The continued rising price growth for both these property types is driven by the upper segments of the market.
Scarcity remains the key driver for the significant growth in residential values across Australia. Covid-19 pushed the government to reduce the interest rates and mortgage rates so there’s a pent-up demand from those engaging in an incredibly low-interest-rate environment.
There’s an increase in demand for homes by first-time buyers. The reason why the demand for the property has skyrocketed to all-time highs is because of several intrinsic and extrinsic factors like:
Record-low interest rates
Working from home and the desire for more space
Various government stimulus programs
But the new property listing volumes are down significantly. In the past few months, the property listings have plummeted over the past 8 weeks by 36.1 per cent. The auction numbers have also been reduced by 40 per cent. Yet the clearance rates were stronger at 86.3 per cent.
We mentioned in our latest property news article — the impact of lockdown on the property market’s spring selling season that there’s a decline in the property listings and sales because sellers are waiting for the lockdown to lift. They don’t have enough confidence to sell and get an optimal price for their homes during the lockdown and also there are government restrictions on house inspections.
The demand and supply gap is widening so it is becoming harder to find the ideal family home. While we anticipated that this is going to be the quietest spring selling season in Australia’s property market because of Covid lockdowns, it is turning out to be something different.
Michelle Marquardt, Head of Prices Statistics at the ABS said "The continued growth in property prices was occurring at a time of record low-interest rates. Persistently low levels of stock on the market were being met with strong demand and properties transacting at an increasingly rapid rate."
The Reserve Bank of Australia Governor, Philip Lowe whose board sets the nation's interest rate said the housing prices are a staggering 19 per cent higher than they were before the pandemic. He reassured that RBA would not raise interest rates to wipe the steam off a charging property market. They won’t trade off job opportunities and wage growth for lower housing rates.
It is likely that the ongoing property boom will continue, particularly once lockdowns are inevitably lifted. Even if the first time buyers get priced out of the market, the investors buying into the market will continue.
But the fate of this boom will be determined by the strength of demand in the long run once the pandemic driven factors finally fade. But for now, it all seems uncertain which gives ample space for a multitude of possibilities on the table.
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