Property Rise Spreads Beyond Sydney & Melbourne
The recent surge in Australian house prices has spread beyond the confines of Sydney and Melbourne. While prices are still markedly higher in the dual booming markets, other state capitals are also posting significant gains. Current conditions point towards a reduction in the speed of growth across most markets, along with the spread of growth into state capitals and regional areas. Nationally, housing values have rebounded 6.7% since the low of June last year, but are still 2.2% below the most recent peak in October 2017.
According to the latest figures from CoreLogic, capital city prices were up 0.9% on average for January 2020, while regional markets recorded a 0.7% increase for the month. While Melbourne and Sydney still recorded the most growth at 1.2% and 1.1% respectively, other markets seem to be catching up. Hobart saw 0.9% growth for the month, with Brisbane up 0.5%, Canberra up 0.3%, Adelaide up 0.2%, and Darwin and Perth up 0.1%.
The top 10 capital-city price increases were in areas of Sydney and Melbourne, while six of the 10 biggest falls were in Perth and its surrounds. While there are obviously still huge discrepancies between markets, the struggling markets of Perth and Darwin highlight the national growth spread as both cities clawed back into positive territory. Regional Tasmania saw the strongest growth outside the capitals, while outback Queensland and WA led regional declines.
According to Tim Lawless from CoreLogic, "Factoring in the seasonal effect, the latest results indicate a reduction in the speed of growth across most markets, especially for Sydney and Melbourne where affordability constraints are once again becoming more pressing... We were seeing values rising by nearly 3 per cent back in November month-on-month in Sydney. That growth rate is now reduced down to 1.1 per cent, and Melbourne's reduced from a peak monthly rate of 2.3 per cent in October down to 1.2 per cent in January."
Growth is expected to continue in the property market throughout 2020, although it's nothing to get too excited about. According to Mr. Lawless, the weaker trend in price growth is likely to continue as more property owners take advantage of the rising market and make the decision to sell: "Our expectation is that through the March quarter we probably will see listing numbers rising much more substantially as we see home owners taking advantage of what have been quite strong selling conditions."
Other commentators are more optimistic, however, with AMP Capital senior economist Diana Mousina tipping Sydney and Melbourne to set new record high prices within the next few months: "Especially as we expect two more RBA interest rate cuts over the next six months which will fuel additional demand for housing, as the cost of borrowing falls... However, after mid-year, we expect the pace of growth in home prices to slow." According to Ms. Mousina, growth will be tempered by higher household debt to income ratios, tighter bank lending, increased housing supply, and a weaker economic backdrop.