Despite the impacts of the Coronavirus, Australia has ranked within the top 20 countries in the world for house price growth, according to the latest Knight Frank Global House Price Index, suggesting a positive sign for the property market.
Performing well in the independent consulting and real estate agencies second quarter results, Australia nabbed the 19th spot for house price growth, recording 6.1% growth in house prices and rising 37 places from a year ago when it came last out of 56 countries.
Australia, however, has tumbled nine spots from last quarter where it was ranked 10th in the world, with 12-month house price growth at 8.6%.
The report aims to track the movement of mainstream residential prices across 56 countries and territories, releasing new analysis every quarter. The quarter two report analysed the property market up to 30 June 2020, when most global markets felt the impact of the COVID-19 pandemic.
Knight Frank’s Head of Residential Research Australia Michelle Ciesielski said the report offered a glimpse into the impact of COVID-19, and while Australia did experience a slight decline in growth, it performed better than average.
“While annual price growth in Australia has fallen slightly from the previous quarter, growth is still positive and 1.4 per cent higher than the average annual price change of 4.7% across the 56 countries and territories tracked in the index,” she said.
“Australia has dealt with the COVID-19 pandemic better than some other countries and territories around the world, with the length and severity of the lockdown not as strong, which partly explains its stable performance.
“However, it can also be attributable to the state of the housing market prior to the pandemic, with Australia’s market strong heading into 2020 with demand high and stock levels low.”
New Zealand beat-out Australia for the best performing country in the Asia Pacific region, ranking ninth and recording growth at 9.1% over the past year. The result, however, was also a decline for Australia’s Pacific neighbour, who had ranked second in the world last quarter with 12-month growth at 14.5%.
The report commented that although New Zealand was among the countries who had initially been considered to handle the pandemic well, this performance did not necessarily translate to results.
“New Zealand, Germany and South Korea, three countries that were initially thought to have dealt with the pandemic most effectively registered mixed results,” it said.
“Germany has yet to report Q2 figures, New Zealand slumped from second to 11th place in the rankings between March and June – although it still recorded 9% annual price growth – and South Korea, where price growth was anaemic at 0.1% in Q1 has seen annual price growth pick up to 1.3%.
“These trends suggest the impact of the pandemic on global housing markets is likely to be inconsistent and irregular.”
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Australian Property Market by State
Over September, the CoreLogic Home Value Index showed a 0.1% fall in national dwelling values, however, this might not paint the whole picture. Consumer confidence in the housing market is up, according to a recent sentiment report from Westpac, and despite the national drop in house values, six out of Australia’s eight capital cities saw home values rise.
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Although Australia has now entered its fifth consecutive month of national decline, the 0.1% drop was the smallest decline in values since house prices started to drop in May of this year, and it can be mainly attributed to the Melbourne and Sydney markets.
The only two capitals to experience a decline, the Melbourne and Sydney markets make up approximately 40% of Australia’s housing stock and 55% of its value, allowing these markets to have a large impact on national performance.
Victoria
The Melbourne property market has suffered a large blow to property prices during the pandemic, with CoreLogic tracking housing values down -0.9% over September. CoreLogic Head of Research, Tim Lawless however, believes this will pick-up over the next few months.
“By far the weakest result across the capital cities, Melbourne housing values were down 0.9% in September,” he said.
“Since peaking in March, Melbourne values are down 5.5%. With restrictions starting to lift and private home inspections once again permitted, we expect to see activity lift in October.”
Melbourne dwelling values are now down -5.5% from their record high March this year.
New South Wales
The other capital to see house prices continue to decline, Sydney saw house prices drop -0.3% over September, though this rate of decline has been consistently easing since July.
CoreLogic Head of Research for Australia, Eliza Owen, said despite the continued fall, there could be hope for both the Sydney and Melbourne markets over Spring.
“There’s been a really interesting turn in market sentiment over September,” she told the ABC.
“We’ve started to see a lift in consumer sentiment, typical auction clearance rates, new listings are finally starting to rise – up about 9 per cent over the month.”
Despite the fall, Sydney has also seen an increase in new listings. In the four weeks to 20 September, new listings were up by 382, according to CoreLogic data.
Australian Capital Territory
Canberra has remained relatively resilient to the impacts of COVID-19 and has continued to see growth, the market rising by 0.4% over September.
Mozo Property Expert, Steve Jovcevski believes this trend will continue into the coming months.
“Canberra’s fared relatively well in recent months,” Mr Jovcevski said.
“Obviously it’s a totally different market given its high number of public servants, plus it’s not as reliant on tourists as some of the other capitals.
“Prices have continued to increase and vacancy rates have remained low, and I think that will continue in the spring season with price increases of 3-4% to come.”
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Western Australia
Perth record a modest increase in dwelling values over September, prices increasing by 0.2% as available stock tightens in some suburbs.
Western Australian property investment consultancy, Momentum Wealth, believes the Perth property market offers opportunity for buyers, with areas close to the CBD and school zones proving most popular.
“A lot of the activity in these established areas has been driven by owner-occupiers and first-home buyers, many of whom are recognising the market’s relative affordability and the opportunities this is bringing in terms of trading up their existing home or entering the market at a lower price point,” said Momentum Wealth Chair of the Residential Investment Committee, Emma Everett.
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South Australia
Despite being a market that traditionally lags behind the eastern states, Adelaide was one of the top performers over September and saw dwelling values rise 0.8% as consumer confidence in the market grows.
The Westpac-Melbourne Institute Index of Consumer Sentiment found confidence in the South Australian housing market jumped 10% over September.
Mr Jovcevski believes the Adelaide market might be an attractive option for investors wanting to avoid the main players.
“Like Perth and Canberra, Adelaide may be a location investors from interstate start paying close attention to if they’re turned off the market’s in Melbourne and Sydney,” he said.
Queensland
Although Brisbane saw a 0.5% increase in dwelling prices over September, Mr Jovcevski believes more stock will soon enter the market, bringing prices down and making conditions favourable for home buyers.
“Things haven’t been too bad in Brisbane and prices haven’t dropped a lot at all,” he said.
“As we enter September a lot more supply is going to start coming onto the market though which will likely see prices come down by 3-4% in the next few months.”
Northern Territory
Darwin property experienced the biggest increase over September, with dwelling prices jumping by 1.6%, with a 2.3% increase over the past three months. Competition is high, with properties selling quickly in sought after suburbs such as Lyons, Muirhead and Durack.
“Supply and demand has always had a huge influence on the time on market, and currently with demand at its highest levels in some time, and supply at a low level, I would expect days on market to stay similar or even go down,” O’Donoghues First National residential sales agent Tim Mackenzie told NT News.
“… if you are looking to purchase it would be wise to have finance in order, or at the very least have spoken to a bank or broker to help guide you in the price range you can afford. I have seen over the last few months people falling in love with a home, only to see it sold before they have been able to get any pre-approval on finance.”
Tasmania
Although Hobart dwelling prices increased by 0.4% over September, Mr Jovcevski believes the market might have peaked.
“Prices in Hobart have still actually increased during the COVID period and the rental market is still doing outstandingly well for investors given the incredibly low vacancy rates,” he said.
“I think we’ll begin to see the end of that very soon though – at least on the property value side of things. Prices will probably either start to plateau or come down in the next few months.”
Words by Kathryn Lee
Sources:
- Global House Price Index Q2 2020 Knight Frank
- Knight Frank Global House Price Index Q1 2020
- Knight Frank Press Release 8 September 2020
- Westpac Consumer Sentiment October 2020
- Hedonic Home Value Index Report CoreLogic 1 October 2020
- Housing Market Update CoreLogic October 2020
- CoreLogic Head of Research for Australia Eliza Owen as quoted by the ABC
- CoreLogic sales and listings numbers reveal an unlikely city on the rebound
- MOZO Property Expert, Steve Jovcevski
- Momentum Wealth Chair of the Residential Investment Committee, Emma Everett as quoted by Mirage News
- O’Donoghues First National residential sales agent Tim Mackenzie as quoted by NT News
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