Property prices rise across the board in May: Corelogic

The runaway freight train which is Australian property prices show no signs of losing steam just yet, with another month of considerable increases recorded in May.

Corelogic’s latest Home Value Index revealed that national prices rose by 2.2% last month - the second highest increase of 2021, beaten only by the 2.8% lift in March which was the ‘fastest rate of appreciation’ recorded in 31 years.

According to research director, Tim Lawless, the interesting part of this month’s growth was that it encompassed most of the country and wasn’t limited to just houses.

“Values were up by more than 1% across every capital city over the month, with both house and unit values lifting across the board,” he said.

“Of the 334 SA3 sub-regions analysed by CoreLogic, 97% have recorded a lift in housing values over the past three months. Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets.”

Hobart and Sydney homes running hot

While prices lifted across the country, it was the Hobart and Sydney markets that dominated the increases once again in May.

Hobart recorded a 3.2% monthly value increase which puts its annual growth rate at 16.5%, while Sydney recorded a 3.0% month-on-month increase which puts the Harbour City’s annual growth rate at 11.2%.

Australian home value changes - Corelogic Home Value Index (June 2021)

This latest increase in values adds to what has been a relatively strong period of growth for Sydney, Lawless explains, particularly when compared to the city’s position for large parts of 2020.

“From a geographic perspective, it was the smaller capital cities that led the housing market out of the COVID slump, but now Sydney has risen through the ranks to record the largest capital gain over the past three months with values up 9.3%.”

What’s driving property growth?

Corelogic’s figures show there have now been eight consecutive months of national dwelling value increases since September. And as the table above shows, values in each major city have risen over the last 12 months.

So what’s continuing to prop up this surge in growth? Simply put, it’s cheap to borrow money right now and there are currently more buyers than homes to buy.

“The combination of improving economic conditions and low interest rates is continuing to support consumer confidence which, in turn, has created persistently strong demand for housing,” said Lawless.

“At the same time, advertised supply remains well below average. This imbalance between demand and supply is continuing to create urgency amongst buyers, contributing to the upwards pressure on housing prices.”

A quick look at the average home loan interest rates in the Mozo database shows just how cheap, relatively, it is to borrow right now.

Both the average variable rates for owner occupiers (3.26%) and investors (3.66%) making principal and interest repayments are at the lowest points we’ve seen since we started tracking back in January 2015. Fixed rates are also at similarly low levels.

There are indicators emerging to suggest that we’ve hit an inflection point, at least with fixed rates. Lenders have already started lifting longer term fixed rates (4 and 5-year) while the end of the Reserve Bank’s term funding facility on June 30 may cause similar upward movement in shorter (1, 2 and 3-year) fixed rates.

RELATED: June home loan snapshot: Bendigo, Citi and Macquarie lower variable rates

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