Australian housing values increased a further 1.6% In July, according to CoreLogic’s national home value index.
The latest rise takes housing values 14.1% higher over the first seven months of the year and 16.1% higher over the past twelve months.
CoreLogic's research director, Tim Lawless, described the market as strong, but losing steam. “The 16.1% lift in national housing values over the past year is the fastest pace of annual growth since February 2004, however the monthly growth rate has been trending lower since March this year when the national index rose 2.8%.”
Mr Lawless attributes the lower rate of growth in housing values to several factors. “With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community. Along with declining home affordability, much of the earlier COVID related fiscal support (particularly fiscal support related to housing) has expired. It is however, encouraging to see additional measures being rolled out for households and businesses as the latest COVID outbreak worsens.
“On the flipside, demand is being stocked by record low mortgage rates and the prospect that interest rates will remain low for an extended period of time. Dwelling sales are tracking approximately 40% above the five-year average while active listings remain about -26% below the five-year average. The mismatch between demand and advertised supply remains a key factor placing upwards pressure on housing prices,” Mr Lawless said.
Although the pace of growth has slowed, housing values continue to rise at a rate that is well above average across most areas of the country.
Overall, Australia's housing market remains in a strong position, however signs of a slowing rate of appreciation have become more evident.
The pace of capital gain has been tapering since April this year which can be attributed to growing housing affordability challenges along with less fiscal support. It is likely recent COVID outbreaks and associated lockdowns have contributed to some of the loss of momentum as well, particularly from a transactional perspective in Sydney which is enduring an extended period of restrictions.
Previous ‘circuit-breaker’ lockdowns have generally seen housing values remain resilient to falls, but the number of home sales and listings activity has been more substantially disrupted in the most recent lockdowns. Once restrictions are lifted, it’s likely pent-up demand will flow through to an increase in activity. However, it is reasonable to assume the uncertainty associated with the duration and severity of Sydney’s lockdown could see a greater level of disruption relative to previous shorter periods of restrictions.
Although the rate of growth has eased, housing values are continuing to rise substantially faster than average. Over the past 10 years, the average pace of monthly dwelling value appreciation has been recorded at just 0.4%.
It’s likely the rate of growth will continue to taper through the second half of 2021 as affordability constraints become more pressing and housing supply gradually lifts.