Last week we received two very strong pieces of data pertaining to the Australian property market.
First, CoreLogic released its dwelling value results for February 2021, which recorded the strongest monthly rise in values (2.1%) since August 2003. Moreover, every jurisdiction across Australia reported strong quarterly price growth (4.0% nationally):
Second, the Australian Bureau of Statistics (ABS) released data on new mortgage commitments, which reported their strongest ever monthly growth:
Regular readers will know that I consider mortgage growth to be the single best indicator for Australian dwelling value growth. This is based on years of empirical data showing that growth in new mortgages typically leads growth in dwelling values, as illustrated in the next national chart:
Clearly, the massive acceleration in mortgage demand is pointing to very strong price growth nationally, which we have already begun to witness.
Below are charts plotting new mortgage growth versus dwelling values across the five major capital city markets.
Mortgage demand in Sydney has accelerated to levels above the 2017 boom, but below the 2013 boom. This would suggest the Sydney’s property market is headed for strong price growth in 2021:
The mortgage rebound has not been quite as strong in Melbourne, suggesting softer (but still strong) property price growth in 2021:
Brisbane’s mortgage demand is the second strongest in recorded history, suggesting turbo-charged price growth in 2021:
Perth’s mortgage demand is even stronger – the highest in recorded history – suggesting massive price growth in 2021:
Unlike the other major capitals, mortgage demand has moderated in Adelaide, which suggests that price growth will soon peak:
Clearly, 2021 is shaping up to be a boom year for Australian property.
That said, I am most bullish on Perth and Brisbane. Not only is mortgage growth strongest in these two markets, but they also represent much better relative value, based on rental returns and their historical valuations versus the other capitals.