House prices on track for record high by February

National house prices are on track to recover losses suffered in the pandemic and hit a new high by February if the current level of growth is maintained, the latest CoreLogic property price index says.

Australian property prices rose for the second consecutive month in November, increasing by 0.8 per cent, driven by record low interest rates and with the RBA’s $100 billion qualitative easing program expected to provide further support. It follows a 2.1 per cent drop in home values between April and September.

While property prices across all capital cities rose over the month for the first time since January, Sydney and Melbourne are expected to take longer to recover than other markets, with home values at levels similar to those of early 2017.

Across the capital cities, Canberra and Hobart led the charge with prices increasing 1.9 per cent in November, followed by 1.4 per cent in Hobart, 1.3 per cent in Adelaide and 1.1 per cent in Perth.

Melbourne had a turnaround from October’s falling prices, with property values rising 0.7 per cent in November. Values increased 0.6 per cent in Brisbane and rose 0.4 per cent in Sydney.

“The national home value index is still seven tenths of a per cent below the level recorded in March, but if housing values continue to rise at the current pace we could see a recovery from the COVID downturn as early as January or February next year,” said Tim Lawless, CoreLogic’s head of research.

I’d be surprised if the growth rate started to falter between now and then,” he added.

Housing values rose to record highs in Brisbane, Adelaide, Hobart and Canberra in November. Perth prices had reached 2006 levels and Darwin values were where they were at in 2007.

The recovery in Melbourne, where home values remain 5 per cent below their recent peak, would take another eight months to reach a new high, if the current growth trajectory remained consistent, and it would take another 11 months for Sydney to surpass its July 2017 peak.

Regional Australia booms

Regional Australia drove the growth in national house prices in November, with values rising 1.4 per cent, double that of the capital cities.

Regional Queensland has led the rise over the past three months, posting a 3.2 per cent lift, followed by regional NSW where values are up 3.1 per cent.

Westpac senior economist Matthew Hassan said there were still weak parts of the housing market, namely apartments in Sydney and Melbourne, but the resurgence in activity, the lift in sentiment and the promising outlook for a COVID-19 vaccine suggested momentum would gather in 2021.

“We have recently marked up our price forecasts, with a 4 per cent gain now expected in 2021 and a 10 per cent rise in 2022, essentially bringing forward our forecast for a 15 per cent surge that was previously expected to begin in mid-2021,” Mr Hassan said.

Not so rosy out west

The outlier was regional WA where prices fell 5.8 per cent during the pandemic, compared with Perth where values remained flat, probably because of its relative affordability.

The CoreLogic data coincides with the latest Rental Affordability Index, which found conditions for renters improved in Sydney, Melbourne, Brisbane, Adelaide, Hobart and Perth over the past year due to the downward pressure that the pandemic placed on rents in metropolitan areas.

While the JobSeeker supplement had improved rental affordability for Newstart households across the country, the index found recipients still faced moderate to extreme rental stress nationwide, with rent costing between 42 per cent and 69 per cent of renters’ incomes in every capital city.