House prices increase at highest rate in 17 years in February

author-avatar By on March 01, 2021
House prices increase at highest rate in 17 years in February

Australian home values spiked 2.1% higher in February according to CoreLogic, the largest month-on-month change since August 2003.

The strong growth was driven by a combination of record low interest rates, improved economic conditions, government incentives, and low advertised supply levels. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 20, 2021. View disclaimer.

Housing values are rising across every capital city and rest-of-state region, and CoreLogic research director Tim Lawless said the country was in the midst of a broad-based boom. 

“The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fueled buyer demand," Mr Lawless said. 

Demonstrating their rebound, Sydney and Melbourne were some of the strongest markets in February, rising 2.5% and 2.1% respectively. 

Mr Lawless said it was unclear whether the rebound could be sustained. 

"Both cities are still recording values below their earlier peaks, however at this current rate of appreciation it won’t be long before Australia’s two most expensive capital city markets are moving through new record highs.

"With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge in these cities.”

corelogicfeb201

Source: CoreLogic

Regional values continued to outpace the growth of capital city markets in February, however the margin has narrowed, with regional markets up 2.1%, only 0.1% ahead of the capitals. 

There are some tentative signs the trend of housing far outperforming units could subside, with Sydney unit values recording their first month of growth since April last year and Melbourne unit values recording their largest gain since late 2019.

A seller's market 

One of the main factors driving housing prices higher is low advertised supply levels, as the number of properties advertised for sale nationally remained 26.2% below 2020 levels over the 28 days ending February 21. 

However, while available supply remains at historically low levels, the quarterly number of home sales is estimated to be up 35.3% from 2020. 

Mr Lawless said the mismatch between supply and demand was a central factor to pushing prices higher. 

“Housing inventory is around record lows for this time of the year and buyer demand is well above average. These conditions favour sellers," he said. 

"Buyers are likely confronting a sense of FOMO which limits their ability to negotiate." 

New listing numbers could see a more substantial lift in March, but Mr Lawless said if buyer demand continues to lift, it's likely overall advertised stock levels would remain low.

“Serious buyers would be well advised to have their financing pre-approved and be ready to act fast in order to secure a property under such tight supply conditions.”

"Extreme" rental market conditions 

There is extreme disparity in the rental market according to CoreLogic.

Tight rental conditions in Perth and Darwin saw annual rental growth above 10%, whereas unit rents in Sydney and Melbourne have plunged 5.3% and 8.0% respectively. 

“The strength in Perth and Darwin’s rental sector can be attributed to a mix of low supply, due to a recent history of low investor participation, and rising demand as interstate migration trends move into positive territory," Mr Lawless said.

"The opposite trends in Sydney and Melbourne have seen rental markets weaken; higher rental supply due to a recent history of investor exuberance, weaker demand from negative interstate migration and, more recently, a demand shock from closed international borders where Melbourne and Sydney were the primary recipients of migrant arrivals.”

The worst may be over for Sydney and Melbourne, with the rental index for Sydney recording two consecutive months of small rises, while Melbourne units edged higher in February after falling for nine of the previous ten months. 


Photo by Phillip Flores 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 which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*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.

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author-avatar
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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