Housing markets pointing to a strong start to 2021
As per CoreLogic, Australia’s housing market finished the year on a strong footing with the national home value index rising a further 1.0% in December 2020.
It was a third consecutive month-on-month rise following a -2.1% drop in dwelling values between April 2020 and September 2020.
Australian home values finished the year 3.0% higher with regional housing values rising by 6.9%, a rate of capital gain that was more than three times higher than the combined capitals, where home values were up 2.0% over the year.
The three key terms we will discuss in this post are:
- Index results till December 31, 2020
- Month-on-month change in national dwelling values
- Change in dwelling values
Let’s discuss each line item one by one.
Index results as at December 31, 2020
In retrospect, the rebound in housing market activity and dwelling values is unsurprising given the rapid and substantial monetary and fiscal response from the Government and policy makers.
“Record low interest rates played a key role in supporting housing market activity, along with a spectacular rise in consumer confidence as COVID-related restrictions were lifted and forecasts for economic conditions turned out to be overly pessimistic. Containing the spread of the virus has been critical to Australia’s economic and housing market resilience,” Mr Lawless said.
As remote working opportunities became more prevalent and demand for lifestyle properties and lower density housing options became more popular, regional areas of Australia saw housing market conditions surge. “Regional housing markets had generally underperformed relative to the capital city regions over the past decade, but 2020 saw regional housing values surge as demand outweighed supply,” said Mr Lawless.
2. Month-on-month change in national dwelling values
On the flipside, higher density housing has generally underperformed throughout the year, with capital city unit values holding reasonably firm (+0.2%) while house values were up 2.6%. Excluding Melbourne, every capital city recorded a higher rate of capital gain for houses relative to units in 2020. According to Mr Lawless, the stronger growth conditions for houses over units is due to a range of factors. “Unit markets have historically been more popular amongst investor buyers; demand from investors has been weighed down by weak rental conditions across the unit sector along with high supply levels in some precincts. A transition of demand towards lower density housing options has helped to buoy house values.”
3. Change in dwelling values
Although housing markets are gathering pace, four of the eight capitals are still recording dwelling values lower relative to their previous peaks. Melbourne home values are still -4.1% below their March 2020 peak and Sydney dwelling values need to recover a further 3.9% before surpassing the previous July 2017 peak. Perth and Darwin values remain -19.9% and -25.7% below their 2014 peaks.
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