Dwelling values up, but momentum set to slow

National home values rose 1.9 per cent in June, taking annual growth to 13.5 per cent for the financial year.

The growth in Australian dwelling values was led by houses, which rose 15.6 per cent over the year, compared to a 6.8 per cent lift in unit values.

“This is the highest annual rate of growth seen across the Australian residential property market since April 2004, when the early 2000’s housing boom was winding down after a period of exceptional growth,” said CoreLogic head of research for Australia, Eliza Owen.

“However, there are some markets where performance is starting to ease more notably.”

Each of the capital cities saw an uplift in dwelling values in June, ranging from a 3.0 per cent rise in Hobart to a more subdued 0.2 per cent lift in Perth.

The performance gap has narrowed between regional Australia and the capital cities, though regional Australia did outperform slightly in monthly growth terms, rising 2.0 per cent through June compared to 1.9 per cent across the combined capital cities.

Ms Owen reaffirmed the strong demand-side factors underlying growth.

“Before the recent uncertainty of growing COVID-19 case numbers, there were plenty of demand-side factors driving housing market growth through the first half of 2021,” she said.

“In May, the unemployment rate fell to 5.1 per cent, and the underutilisation rate fell to 12.5 per cent, the lowest level since February 2013.

“Consumer confidence remained elevated through June, although down from the recent April highs. Elevated savings accumulated through COVID-restrictions last year, along with a more confident consumer sector, has encouraged consumption of larger goods, such as housing.

“This has all occurred against a back-drop of continued low mortgage rates, which is one of the most significant demand drivers.”

In addition to these strong demand conditions, Ms Owen noted total advertised stock remains relatively low.

“The latest listings count from CoreLogic indicates that in the 28 days to June 27th, total advertised stock remained 24.4 per cent below the five-year average. This dynamic of strong consumer demand, and low housing supply, continues to create some urgency among buyers.”

Despite another month of strong gains, there are signs that some heat is coming out of the market.

The monthly change in Australian home values of 1.9 per cent sits well above the decade average which is 0.4 per cent.

However, this month’s growth rate is down three basis points from May 2021, and nine basis points from a recent peak in March 2021.

“This easing in the pace of growth at the top end of the market is another clear sign of a shift in momentum,” Ms Owen said.

“The rest of the market tends to follow movements at the high end, and this is the first time in nine months that the high-tier growth rate has not accelerated.”