Australia's housing value rebound continued into 2020, with price increases spreading beyond the surging Sydney and Melbourne markets.
CoreLogic's monthly house price index showed the pace of growth slowed nationally to 0.9% in January, but the annual growth rate was 4.1%, the fastest pace of growth in three years.
Melbourne led the house price increase with values up by 1.2%, followed by Sydney where prices rose by 1.1%.
All other capital cities led gains, with Hobart up by 0.9%, followed by Brisbane (0.5%), Canberra (0.3%), Adelaide (0.2%) and more modest 0.1% gains for Perth and Darwin.
The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks. These lenders may not necessarily be eligible for the scheme.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) owner-occupied home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
CoreLogic's Head of Research Tim Lawless said despite the increase, there were some signs of a slowdown.
"Seasonal effects provide some explanation for the slowdown," Mr Lawless said.
"Factoring in the seasonal effect, the latest results indicate a reduction in the speed of growth across most markets, especially for Sydney and Melbourne where affordability constraints are once again becoming more pressing. As advertised stock levels rise over the early part of the year, we could see some further dampening of growth rates.
"There is evidence to suggest that housing value growth rates are tapering in Sydney and Melbourne, although with values rising at more than 1% month-on-month, this pace is still unsustainable considering household income growth is sluggish and housing affordability challenges are worsening."
The strongest gains were recorded across properties at the upper end of the market, particularly in Sydney and Melbourne, and to a lesser extent, Brisbane.
Sydney's top quartile market has recorded a 10% lift in house prices over the last twelve months, compared with a 3.4% rise across the lower end of the market. Melbourne's top quartile is up 11.5% in value over the past year, compared with a 5.6% rise at the lower end of the property market.
The stronger performance across the more expensive end of the Australian property market comes after a larger correction during the downturn, but may also reflect a rise in borrowing capacity following the changes from APRA last year, as well as a rise in owner occupier buyers.
Nationally, rents were up as well, taking the annual change in rental rates to 1.3%, likely due to the tightening in rental supply.
Mr Lawless expects house prices to cool off later in the year as an increasing number of property owners take advantage of a rising market to sell.
"Interest rates are expected to see further reductions, which, along with consistently strong population growth, is likely to continue to support housing demand," Mr Lawless said.
"A big test for the market will be advertised supply levels. As the market moves out of the festive season slow down, we are expecting more home owners to take advantage of the strong selling conditions and recovery in housing prices.
"Advertised listing numbers remained below average through most of 2019. We're expecting the number of homes available for sale to also rise in 2020, which may result in a wider range of choice. The knock-on effect could dampen the sense of urgency to purchase housing, and could mitigate more rapid growth."
NAB's expectation for house price growth is that it will slow in 2020 and 2021 in Sydney and Melbourne, according to their Residential Property Survey Q4-2019.
"Outcomes for the other capitals are likely to be more mixed, driven by state specific factors," NAB chief economist Alan Oster said.
"Overall, we expect nationwide dwelling prices to rise by around 4% in 2020 before growth slows to around 2.5% in 2021. Low interest rates are expected to continue to provide support, as is the low level of unemployment and still healthy population growth in Sydney and Melbourne, however affordability constraints will arise as prices reach their previous peak."
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.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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