The end of the financial year sees Australian property values 13.5% higher, but the market shows signs of slowing.
CoreLogic’s Index results revealed that June saw Australian property values rise another 1.9%, taking the annual increase to 13.5% for the 2020/21 financial year.
Detached dwellings outpaced units and apartments considerably, growing 15.6% compared to 6.8%.
According to CoreLogic Head of Research for Australia Eliza Owen, a growth rate this high hasn’t been seen since April 2004.
“However, there are some markets where performance is starting to ease more notably,” she said.
Snapshot of housing market growth around Australia
All the capital cities experienced a price increase in June and over the financial year.
Perth saw a meagre 0.2.% uplift in June compared to Hobarts 3.0% rise.
June also saw the gap between the capital cities and regional Australia narrow, with regional outperforming the capital cities by 0.1%.
Darwin was the front runner for the capital cities, experiencing a 21% growth rate, with Hobart following close behind at 19.6%.
The regional areas of NSW and Tasmania had the highest growth over the financial year with a 21.1% rise for NSW and 20.8% for Tasmania.
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What’s driving Australian property values?
Ms Owen outlined the factors driving the growth, including the falling unemployment rate and consumer confidence.
“In May, the unemployment rate fell to 5.1%, and the underutilisation rate fell to 12.5%, 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 backdrop of continued low mortgage rates, which is one of the most significant demand drivers,” she said.
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The housing market is showing signs of slowing
However, despite the historic growth experienced over the financial year, there are signs that the market is beginning to slow.
Although the average 1.9% rise in Australian property values seen in June is above the decade average, the growth rate has shrunk 30 basis points since May 2021 and 90 basis points since March 2021.
Slowing affected most of the capital cities but was most evident in Darwin and Perth, with Darwin’s monthly average falling from the 2.1% it saw in January to May, to 0.8% in June.
Perth experienced a similar trend with a June growth rate of 0.2%, down from a 1.4% monthly average between January and May.
The only capital city to see a continued increase in the monthly growth rate was Canberra, where dwelling values were 2.3% higher in June, compared with a 1.7% gain in May.
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Ms Owen explained that the slowing experienced in Perth and Darwin was due to the slightly different supply-demand dynamic compared to the other capital cities and regions.
“For the past three months, the sales to new listings ratio has averaged 1.1 across Darwin and Perth.”
“While the implication is that there is 1.1 sales for each new listing, which could be enough to elicit further growth in dwelling values, these are the lowest sales to new listings results of the capital city markets,” she said.
Slowing is also evident at the higher end of the market in the dwellings valued in the top 25%.
This end of the market saw the largest deceleration, slowing to 8.0% in June from the 9.2% in three months prior.
According to Ms Owen, the deceleration of growth at the high end of the housing market is an indication of things to come for the rest of the market.
“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,” she said.
Words by Nell Matzen
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