The Domain House Price Report showed prices continued to accelerate in all capital cities over the June quarter driven by the perfect storm of low-interest rates, low numbers of houses for sale, strong demand for property and government stimuli.
Median prices in Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart hit new highs, with Darwin and Perth not far behind, both recording their highest prices in several years.
The June quarter was the first time Melbourne and Canberra median prices broke the $1 million mark, hitting $1.02 million and $1.01 million respectively.
Canberra led the country in growth, at 10.40% in the quarter, adding $96,000 in value, or a rise of $1054 a day. Compared to 2020, prices are up a massive 30%.
In Melbourne, the post-lockdown economic bounce back continued, with a third consecutive quarterly increase of 4%, producing the strongest annual growth in 11 years.
Sydney median home prices continued their startling upward trajectory surging to $1.4 million, a 24% increase over the same time last year.
Records were also broken in Adelaide, Hobart and Brisbane.
In the South Australian capital, the 5.4% increase over the June quarter was the strongest since late 2007, Greater Brisbane’s 13% annual growth was the strongest in 13 years and in Hobart prices rose 28.7% over the year, the steepest increase in 17 years.
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Growth can’t continue
According to Domain chief of research and economics Nicola Powell, the rate of price growth is unsustainable.
“This is a very unusual rate of growth. Unusual circumstances create extraordinary outcomes,” she said.
“The unusual circumstances over the past 12 months is the focus that’s been placed on our homes. We are spending more time in our homes than ever before and spending less. We are using our homes differently.
“Using increased savings to pay debt can give people more buying power, and for anyone with an increased rate of savings, it’s just collecting dust, so we are seeing people pay down debt or upgrade their homes.”
Are units the future?
With house prices surging, is the Great Australian dream of a quarter-acre block dead?
Dr Powell said for many home buyers the answer is yes, not through choice but necessity, citing the significant gap between the median-priced house and the median-priced unit in the capitals.
“Sometimes, affordability is focused on houses, but units have underperformed comparatively, and we have the biggest price gap on record. There’s an opportunity to seize,” Dr Powell said.
While demand is driving unit prices up - a record price has been set in Melbourne and prices also rose across the quarter in Canberra and Sydney – prices are still significantly less than a house at $572,000 in Melbourne, $504,000 in Canberra and $788,175 in Sydney.
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What does this mean for would-be buyers?
Dr Powell said the June quarterly figures were a “bolt of realism” about what potential homeowners could purchase in their capital city.
“It’s a wake-up call for first-home buyers for understanding that our median house prices have increased so dramatically. They’re stuck in a corner,” Dr Powell said.
“Some governments have tried to address affordability through grants and incentives … and they have been helping first-home buyers get to market quicker because the quicker you can, the quicker you can capture value in your asset. We need to re-look at the Australian dream and be realistic about it.”
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Interest rates are still on hold
While prices are likely to continue to increase in the near term, there is some good news for would-be homeowners.
Pre-Covid a housing boom would likely trigger the Reserve Bank to increase the cash rate, driving up interest rates, to put a brake on inflation.
But with states, and their economies, impacted by rolling lockdowns, the cash rate has been held at a mere 0.10% for nine months, with the RBA indicating a change won’t be afoot until 2024.
Words by Erin Delahunty
- Statement by Philip Lowe, Governor: Monetary Policy Decision
- Cash Rate Target
- House prices in Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart hit record high
- June 2021 House Price Report
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