We are witnessing a replay of the post-GFC housing boom

CoreLogic has released its full dwelling values results for February, which confirmed that a synchronised boom has developed with every capital city market and Australia’s regions reporting strong price inflation.

The results are summarised in the table below:

The 2.1% price growth nationally was the strongest month-on-month increase since August 2003:

According to CoreLogic’s research director, Tim Lawless:

“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”.

The comparison with the post-GFC experience is apt given we witnessed similar conditions to now, namely:

  1. Cratering mortgage rates; and
  2. Massive household and housing stimulus.

Tim Lawless also believes the mismatch between supply and demand is another key factor 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. Buyers are likely confronting a sense of FOMO which limits their ability to negotiate. Vendor discounting rates were estimated at a record low of 2.6% in February, and auction clearance rates have consistently been in the high 70% to low 80%, which is well above average.”

This dearth of housing stock is illustrated clearly in the next chart showing listings levels well below 2016 to 2020:

At the same time, house sales volumes are running way above the decade average:

The upshot is that “Australia’s housing market is now well entrenched in one of the strongest growth phases on record” driven by:

  • Record low mortgage rates;
  • Better than expected economy; and
  • Record low property supply.

Sure, there are headwinds ahead, including:

  • Reduction in fiscal support and the ending of mortgage holidays; and
  • Stalled immigration.

But overall, the ingredients are in place for a booming 2021, which will likely continue well into 2022.

Unconventional Economist
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