According to Tim Lawless from CoreLogic,
the Australian residential property market is on the way up: “It won’t be too
long before it breaks the $9 trillion mark." said the research director,
adding "We’re going through a construction boom, and housing values are
rising very swiftly.” To put things in perspective, the current superannuation
market is worth $3.1 trillion, the Australian stock market is worth $2.8
trillion, and the commercial real estate sector is worth just $978 billion.
Based on CoreLogic data, Australian
property prices rose 5.9% in the quarter to July, which is strong but down from
the 7% peak growth recorded in the three months to May. Every state capital
recorded gains, with Hobart leading the way with 8.2% growth, and Sydney not
far behind with 7.7%. While numbers in the NSW capital are likely to be subdued
in coming months for obvious reasons, even now, figures are exceeding
The nationwide surge in property prices is
being fuelled by attractive mortgage rates, which are historically low and
still attractive to many buyers. There is also a significant discrepancy
between supply and demand, which is the fundamental factor affecting all market
growth. There are more buyers than properties in most Australian markets, with
state capitals still under pressure and regional markets seeing an uptick in
migration due to the pandemic.
In July, the number of homes listed across
the country was a massive 27.1% below the five-year average. In the same
period, sales volumes were 42.6% above the five-year average, with this single
discrepancy going a long way towards explaining current market conditions. With
the market firmly on the side of sellers, vendor discounting was down by 2.8%
in the July quarter.
According to Mr. Lawless, “The common
factor is that low interest rates are continuing to drive demand... It’s also
that disconnect between supply and demand that is at the crux of driving
housing prices higher. Discounting rates also showed how skewed the market is
towards vendors.” Current conditions are doing no favours to first-home buyers,
with numbers on the decline across the country. Getting into the market remains
a big issue for many, with lack of affordability fuelled by rising investor
activity in every state except Queensland.
However, despite high prices across the
country, and a record milestone for the national market, the rate of price
growth is likely to slow for the remainder of 2021 as demand drops in key
markets. While the timing is anything but certain, more sellers are expected to
list their properties once restrictions ease. “If those two things happen or
even if we do see supply rising, that should help rebalance the market towards
buyers and dampen this rapid price growth further.” said Mr. Lawless.