CoreLogic’s dwelling value results for May have been released with values across the Australian capital cities soaring by 1.4% over the month – the third consecutive monthly increase:
The jump in values was overwhelmingly driven by Sydney, where values surged by 1.8% over May:
Source: CoreLogic
Melbourne (+0.9%), Brisbane (+1.4%), Adelaide (+0.9%) and Perth (+1.3%) also recorded solid rises over the month.
Over the May quarter, dwelling values rose by 2.8% at the capital city level, whereas values rose 0.8% across the combined regions:
This rise was again driven by Sydney, where values surged by 4.5%.
In fact, since bottoming on 7 February, Sydney dwelling values have surged by 5.0%:
The next table plots the changes from peak across the various markets:
Despite the strong bounce back, values are still down 9.7% from their April 2022 peak at the capital level, with Sydney (-13.8%) leading the falls.
However, dwelling values are 13.1% higher than their pre-pandemic (March 2020) level at the 5-city aggregate level.
Brisbane (+31.6%), Adelaide (+42.9%) and Perth (+22.9%) have recorded exceptionally strong price gains since the pandemic began, whereas Sydney (+12.6%) has recorded sold growth and Melbourne values (+1.6%) are broadly flat:
CoreLogic’s research director, Tim Lawless, noted the price rebound is a symptom of persistently low levels of available housing supply running up against rising housing demand.
“Advertised listings trended lower through May with roughly 1,800 fewer capital city homes advertised for sale relative to the end of April”, Lawless said.
“Inventory levels are 15.3% lower than they were at the same time last year and 24.4% below the previous five-year average for this time of year”.
“With such a short supply of available housing stock, buyers are becoming more competitive and there’s an element of FOMO creeping into the market”.
“Amid increased competition, auction clearance rates have trended higher, holding at 70% or above over the past three weeks”.
“For private treaty sales, homes are selling faster and with less vendor discounting”, Lawless said.
My view is that Australian home values will rise further from here, with value growth accelerating in 2024 as the Reserve Bank of Australia begins to cut interest rates late in the year or early next, and APRA cuts its 3% mortgage serviceability buffer.
By then, the ‘Fear of Missing Out’ (FOMO) caused by unprecedented net overseas migration and a record tight rental market will combine with increased borrowing capacity as interest rates decrease and the mortgage serviceability buffer shrinks.
It will be a “perfect storm” for the housing market, with values rising sharply in 2024, exacerbating Australia’s housing affordability crisis.
