Property prices rise at fastest pace in 17 years

Australia’s housing values have made their biggest monthly leap since August 2003, rising by 2.1% over February, according to new figures from property research platform CoreLogic. 

Capital city markets were up 2% on average, with Sydney and Hobart leading the way with a 2.5% increase and Melbourne following closely with a 2.1% jump. Meanwhile, regional markets were up an average 2.1%. 

CoreLogic said the surge in home values comes off the back of record low home loan rates, government incentives like HomeBuilder as well as improvements in the economic outlook.

Strong buyer demand amid a relatively tight supply of homes for sale have also put upward pressure on property prices. 

For instance, just this past week, preliminary clearance rates in Sydney hit a high 88.9% across 844 auctions, and in Melbourne, reached 77.7% across 1,273 auctions. Compared to a year ago, these figures represent a greater percentage of homes sold under the hammer yet fewer auctions occurring in the first place. That said, the week leading to Saturday 27 February did see the highest number of scheduled auctions to date in 2021 (2,451 - up from 2,218 in the previous week).

CoreLogic’s research director, Tim Lawless said that despite the strong performance from property markets, home buyer appetite may slow down as prices soar to potentially unattainable levels. 

“Whether this new found growth in Sydney and Melbourne can be sustained is unclear. Both cities are still recording values below their earlier peaks, however at this current rate of appreciation it won’t be long before Australia’s two most expensive capital city markets are moving through new record highs,” he said. 

“With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge in these cities.”

And this decline in affordability will especially be an issue for first home buyers, as unlike owner occupiers they won’t have a property to trade in and will just have to work harder to save for a deposit. 

How first home buyers are tackling higher prices

For this reason, interest in guarantor loans have been climbing since September, according to mortgage broker from Mortgage Choice, James Algar, who told Domain this trend is largely driven by parents who don’t want their adult kids to miss out on climbing the property ladder. 

Guarantor loans allow first home buyers with a smaller deposit than 20% of the property value to avoid a cost known as Lenders Mortgage Insurance (which can add up to thousands of dollars). 

Besides the bank of mum and dad, the government is also guaranteeing up to 15% of a first home buyer’s 20% deposit under the First Home Loan Deposit Scheme. An additional 1,800 spots left over from the first round of the scheme were reissued at the beginning of last month. 

Another tactic to get into the market sooner, according to Mozo’s property expert Steve Jovcevski, is to cast your net wider when searching for an affordable property as a first home buyer. For instance, you could consider buying an apartment instead of a detached house, or even look beyond major capitals like Sydney and Melbourne towards cheaper cities like Adelaide. 

Our property boom survival guide has more tips and market insights, or if you’re wondering what low rate home loans are available right now, get started with a few options below.