Home values continue to rise

Australian housing values lifted by 1.8 per cent in April, according to CoreLogic’s national home value index, with the monthly pace of capital gains easing from a 32-year high in March (2.8 per cent).

Although growth conditions have slowed, housing values are still rising at a rapid pace, up 6.8 per cent over the past three months to be 10.2 per cent higher than the COVID low in September last year.

CoreLogic’s research director Tim Lawless said the pace of capital gains could slow further over the coming months as inventory levels rise and affordability constraints dampen housing demand.

“The slowdown in housing value appreciation is unsurprising given the rapid rate of growth seen over the past six months, especially in the context of subdued wages growth.

“With housing prices rising faster than incomes, it’s likely price sensitive sectors of the market, such as first home buyers and lower income households, are finding it harder to save for a deposit and transactional costs.

“There is already some evidence of fewer first time buyers in the market, with the Australian Bureau of Statistics reporting a -4.0 per cent fall in the value of first home buyer home loans through February, the first drop since May last year.”

Despite the slowdown, positive housing market conditions remain geographically broad-based with every capital city and “rest-of-state” region continuing to record a lift in dwelling values over the month.

Darwin (2.7 per cent) and Sydney (2.4 per cent) recorded the largest month-on-month rise in dwelling values, while Perth values recorded the lowest rate of growth amongst the capital cities at 0.8 per cent.

The four smallest capital cities recorded double digit annual growth (Adelaide 10.3 per cent, Hobart 13.8 per cent, Darwin 15.3 per cent and Canberra 14.2 per cent), reflecting a smaller COVID-related disruption and an earlier start to the growth phase last year.

Melbourne is recording the lowest level of annual growth (2.2 per cent) due to a larger downturn, attributable to the extended lockdown period last year.

The broad trend of houses outperforming the unit sector continued through April as higher density styles of housing experienced less demand amid elevated supply across some inner city precincts. At the combined capital city level, house values (8.6 per cent) have risen at double the pace of unit values (4.3 per cent) over the first four months of the year.

Mr Lawless said a preference shift away from higher density housing during a global pandemic is understandable, but a rise in flexible working arrangements also seems to be supporting greater demand for houses around the outer-fringes of capital cities.

“Relatively weak investor activity, compounded by a supply overhang in some high-rise precincts, is also dampening price growth in unit markets.”