House price boom continues as values rise 2.2% in May

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on June 01, 2021
House price boom continues as values rise 2.2% in May

The property market's hot streak rolled on in May, with national home values rising 2.2% in May.

According to CoreLogic's latest data, the May rise was stronger than the 1.8% spike seen in April but weaker than the 32-year high recorded in March when values surged 2.8%. 

For the second time in three months, growth in the capital cities outpaced their regional counterparts

The combined capital city index rose 2.3% in May compared with a 2.0% rise across the combined regional areas.


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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 10, 2022. View disclaimer.


CoreLogic's research director Tim Lawless said growth conditions remained broad based both geographically and across the housing types and valuations. 

“Values were up by more than 1% across every capital city over the month, with both house and unit values lifting across the board," Mr Lawless said. 

"Of the 334 SA3 subregions analysed by CoreLogic, 97% have recorded a lift in housing values over the past three months.

"Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets.”

Across the capitals, Hobart was the strongest performer with a 3.2% jump, while Perth saw the weakest growth at 1.1%. 

In the regions, regional New South Wales (NSW) led the way with a 2.5% spike, while values in Western Australia regressed 0.1%. 

Corelogicmay01.JPG

Source: CoreLogic

Mr Lawless said favourable economic conditions, low interest rates and strong consumer confidence were continuing to create demand for housing at a time when demand was far outstripping supply.

However, he noted despite the consistently strong headline result, the underlying trends had shifted over the last year. 

“The most expensive end of the market is now driving the highest rate of price appreciation across most of the capital cities, whereas early in the growth cycle it was the most affordable end of the market that was the strongest," he said. 

“From a geographic perspective, it was the smaller capital cities that led the housing market out of the COVID slump, but now Sydney has risen through the ranks to record the largest capital gain over the past three months with values up 9.3%.”

Affordability set to worsen as RBA monitors market 

CoreLogic said they expected values to rise throughout this year and next, albeit at a slower pace. 

"A slowdown in dwelling price appreciation is expected as affordability constraints progressively impact market participation, and potentially tighter credit policies looms further down the track," Mr Lawless said. 

"Messaging from the RBA has indicated they will be watching for any signs of a deterioration in credit standards that could be a trigger for tighter lending rules." 

CoreLogic said worsening affordability pressures were likely to impact first home buyers more than other segments of the market, with signs activity from the group is already lessening. 

Investors are stepping up their activity across the market, which may account for the continued strength across the board, despite affordability constraints. 

CoreLogic noted the reduction in Federal Government fiscal support had little to no impact on housing demand or growth in home values to date. 

Rental conditions remain mostly positive 

Growth conditions had eased a little over recent months but remained strong, with CoreLogic noting the first quarter of the year was seasonally strong for rental markets. 

The monthly increase in capital city dwelling rents eased from an average of 1.0% over the March quarter to 0.6% over the past two months.

Similarly, the rate of growth in rents across the combined regional areas of Australia eased back from an average of 1.4% in the March quarter to 1.0% through April and May.

Sydney and Melbourne continued to have the weakest rental conditions, especially across the unit sector where international border closures have had a more significant impact on demand. 

Sydney unit rents are 1.8% higher in the past three months but remain 7.5% below their 2018 high, while Melbourne unit rents are down 0.4% in the past three months and 8.5% below their 2019 peak. 


Photo by Titus Aparici on Unsplash



Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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