Australian property prices are rising at their fastest pace in 17 years, as every market surges higher

The housing market is running hot.
  • Australia’s property prices rose 2.1% in February, marking their strongest national growth in 17 years according to CoreLogic.
  • It comes as every state and territory market rises simultaneously, on the back of record low interest rates and a ‘fear of missing out’.
  • “The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fueled buyer demand,” head of research Tim Lawless said.
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It doesn’t really matter where you live right now, real estate prices are almost guaranteed to be moving higher.

The latest CoreLogic data shows that right across the country, property markets are running hot in tandem for the first time in over a decade.

“The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fueled buyer demand,” head of research Tim Lawless said.

It’s been enough to push the national index 2.1% higher in February alone, the largest single month increase since August 2003.

As record low interest rates encourage buyers to pile in, the lack of sellers is helping create outsized competition among bidders, pushing price at a rapid clip.

“Housing inventory is around record lows for this time of the year and buyer demand is well above average. These conditions favour sellers. Buyers are likely confronting a sense of FOMO which limits their ability to negotiate,” Lawless said.

Auction clearance rates are hovering around 80% while vendor discounting falls to 2.6%, a record low.

Affordability to tumble in Australia’s priciest cities

Leading the pack higher was Australia’s largest, and already most expensive capital cities, Sydney and Melbourne. They pushed 2.5% and 2.1% higher respectively, regaining what ground was lost during 2020.

“Whether this new found growth in Sydney and Melbourne can be sustained is unclear. Both cities are still recording values below their earlier peaks, however at this current rate of appreciation it won’t be long before Australia’s two most expensive capital city markets are moving through new record highs,” Lawless said.

“With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge in these cities.”

Further afield, some of Australia’s smaller cities are among the strongest performers since the turn of the new year. Darwin is up 5.5% since December, while Hobart and Perth are up 4.8% and 4.2% apiece.

Regional prices meanwhile are up 5.4% nationally over the last three months as they continue to rise faster than the capital city average.

Lending breaks new highs, again

Naturally, as prices rise ever higher, so too is the amount of debt Australians are piling up, taking on more than $28 billion in January alone.

On Monday, new ABS figures showed owner-occupier loans are up 12% on last month’s record high as Australians rush into the market.

“Consistent with accelerating price growth, households are taking out bigger mortgages. The average new loan size for owner-occupiers is now up around 12% since July for established dwellings to $545,000 nationally,” Tim Hibbert, principal economist for BIS Oxford Economics, said.

“Investor demand growth continues to lag that of owner-occupiers, but the gap is closing.”

Similarly, new construction loans were up 20% on the previous month as the HomeBuilder incentive encourages new homebuilding.

The RBA will be watching this explosion in household debt closely as it considers an intervention. But with all that growth in new lending, it raises the question of whether responsible lending laws really need to be watered down given credit is flowing free and fast.

Still despite the reality, it’s unlikely the Morrison government will back down on the move. It means yet more records could soon be broken as prices surge ever higher.

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