Australian Property Market Quarterly Review

CoreLogic recently released a quarterly review of Australia’s property market. Here’s what it says.

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Table of contents

1. New South Wales
2. Victoria
3. Queensland
4. South Australia
5. Western Australia
6. Tasmania
7. Northern Territory
8. Australian Capital Territory

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The Australian property market has been riding high throughout 2021, with high auction clearance rates and rising dwelling values pushing the combined value of the Australian housing market to $8.1 trillion as of April 2021. The combined value of the market value sits 7.6% above the previous high in October 2017 as identified in the CoreLogic Home Value Index, and has been propelled in large part by low-interest rates and favourable lending policies. 

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The strength of the property market in Australia in 2021 has helped to cut NSW’s budget deficit projection in half, thanks to the $9.379 billion generated by stamp duty over the 2020-21 financial year, making it the number one source of tax revenue in NSW. 

With many left wondering how long this property boom can last, CoreLogic has identified some potential weaknesses for the market in their quarterly review of the Australian property market, as well as providing a state-by-state analysis of each market. Let’s take a look. 

Points of weakness in Australia’s property market 

What goes up, must eventually come down. Australia’s property market is no exception, and it has certainly been up this year. 

A large reason behind the property boom was the RBA setting interest rates to a historic low of 0.1%, and any changes to this interest rate could dampen the property market, according to CoreLogic. 

“At this stage, the most likely trigger of another housing market downswing would be a change in mortgage lending rates or lending conditions.”

While the RBA stated that interest rates were unlikely to rise until 2024, economists at the Commonwealth Bank of Australia forecast that the cash rate could rise as early as 2022 due to strong labour conditions, which could spell the end of the housing boom. 

On the point of lending conditions, the CoreLogic report found that property loans had increased over 25% in the 12 months leading up to March 2021, totalling $274.6 billion. Much of this increase has been due to a combination of the low-interest rates, households having additional savings due to being unable to travel, and more relaxed lending policies from financial institutions. 

Should these lending conditions change or mortgage rates be increased, CoreLogic argues that Australia may experience “a downswing in housing values.”

Finally, CoreLogic noted that growth in the national housing market during April fell to 1.8% compared with the 2.8% growth rate experienced in March. This slowdown is attributed to the increased prices of properties, which is causing an issue of “affordability constraints.” 

The recently released NSW Budget also outlined housing affordability as the reason why the market may reach a peak toward the end of this year. 

State by state performance 

While Australia’s housing market as a whole has been in an upswing, the property market in each state has performed differently, each succeeding to varying degrees. Here’s a state-by-state breakdown of this quarter’s property market performance.

New South Wales 

Sydney’s property market has experienced some of the highest growth in dwelling values in Australia, rising 9.3% through the calendar year to April 2021 and bringing the median value of Sydney properties up by $80,000 over this period. CoreLogic estimates that property transactions increased by 18% over this period, during which there were 96,505 transactions.

A large portion of the property value increases has been felt at the more expensive end of the property market, with CoreLogic finding that the top 25% of Sydney values increased by 12%, while lower-valued properties experienced a 5.4% increase since the beginning of 2021.

The price growth of Sydney property values has slowed down, decreasing from 3.5% growth in March to 2.4% in April. CoreLogic speculates that the recent surge in newly listed property advertisements could be leading to this decrease in growth, with the Inner City market, Campbelltown and Warringah seeing the biggest increase in listings this year.
Moreover, as Sydney is home to some of the most expensive real estate in the world, housing affordability may be of particular concern over the coming months. 

Regional NSW also experienced a significant spike in sales volumes, increasing 32.6% in the 12 months leading up to April with a total of 71,032 transactions.

Victoria 

Victoria hasn’t made as strong a recovery as New South Wales, largely due to bouts of COVID-19 that the state has had to deal with and the ensuing lockdowns that followed. 

While property values in Melbourne did rise 2.4% compared with February 2020, this increase was below the combined increase in housing values in Australia’s capital cities which sits at 7.4%.

Sales volumes of properties rose in Victoria by 2.8% over the 12 months to April, totalling roughly 77,000 transactions. In Regional Victoria, however, sales volumes increased by nearly 30%, indicating the highest recorded sales volume increase in Regional Victoria’s property market. 

Total listings in Victoria over the 4 weeks prior to the 23rd of May are 36.9% below the 5-year average, which CoreLogic predicts “will likely keep upward price pressure strong over the coming quarters.”

In Melbourne, however, there were 27,313 properties listed for sale, which is 6.6% above the 5-year average. 

In addition to rising property prices, unit prices in Melbourne city have risen 2% in the 12 months to April, despite a 2.10% decrease in rental prices over the same period. This suggests that either more people plan on living in their units, or people are preparing for a post-pandemic Melbourne in which more overseas travellers will come seeking rental apartments. 

Queensland 

This quarter, Queensland has been a strong performer with regard to its property values, which CoreLogic attributes in large part to the increased domestic migration to the state. This is mostly due to the COVID-19 pandemic, with fewer people migrating to capital cities, and an increase of people migrating away from them. Domestic migration is at a level not seen since the ABS began measuring it in 2001, and Queensland has been the destination of choice for many of those who have decided to move states. 

As such, 77 of Queensland’s suburbs saw an increase in dwelling values over the three months to April 2021, and overall dwelling values are 13.7% over the previous high. And, much like Sydney, most of the value increases in Brisbane occurred within the highest valued 25% of properties which rose 6.8% compared with the 5.3% increase felt by properties in the “middle of the market.” 

Sales volume in Brisbane increased by 25.6% in the 12 months to April, with annual sales reaching 70,152 in Regional Queensland, representing a 40.4% increase over the same period. Regional Queensland’s sales volume is the highest experienced since 2008.

As we mentioned earlier, a large part of Queensland’s property market increase derives from the increase in domestic migration, with 9,763 interstate migrations over the December 2020 quarter, 27.5% of which came from Melbourne.

Additionally, the low cost of Queensland real estate, particularly looking at mortgage rates relative to rental costs, may be attractive to property buyers, says CoreLogic. 

“With typical mortgage rates at record lows, CoreLogic estimates around 41 % of properties across Greater Brisbane would be cheaper to service a mortgage than rent₈. This compares to 30.3% of properties across the ACT, and just 3.3% of properties across Melbourne, and 2.1% of properties across Sydney.”

South Australia

South Australia has also enjoyed a spike in its property market, and much like New South Wales, the recent SA budget revealed that the state’s projected deficit was mitigated somewhat thanks to over $200 million in stamp duty revenues. 

Adelaide’s quarterly dwelling values increased by 4.3%, far above the 5-year average quarterly result of 0.8%, and sales volumes through April rose by roughly 36.4% above the 5-year average for the month, which coincided with a decrease in the number of dwellings available for sale. 

The number of total dwellings in the SA market was 33.6% lower than the 5-year average, sitting at 9,336. The increased demand and decreased supply of SA properties is being assuaged in part by the development of new properties, with 10,446 applications to build properties between June 2020 and April 2021. Property Development in the state has been promoted due to the HomeBuilder Scheme which provides a $15,000 grant to new home buyers.

However, South Australia has not enjoyed the same influx of interstate migration as Queensland and given that net overseas migration has turned negative for the first time since 1994, South Australia’s population growth will take a hit and this could have a negative impact on housing demand.  

Western Australia 

Property market growth in Western Australia began to slow to 0.3% and 0.8% in Perth, down from 2% in March, which CoreLogic attributes to the state’s spike in property listings over the quarter. Listings climbed 13.8% over the previous year, which is the fourth highest rise in Australia behind Victoria, New South Wales and the Northern Territory respectively. 

Alongside this uptick in property listings, Perth had the largest increase in real estate transactions of any capital city after hitting a 6-year high in real estate transactions, with 41,000 transactions in the 12 months to April and a 38.9% increase over the prior year.

CoreLogic states that WA is going through a skills shortage with many occupations struggling to fill roles, including wholesale trades, food services and construction being the industries most affected. This is placing upward pressure on labour costs and is in part fuelling positive net interstation migration for South Australia, with interstate migration hitting levels not seen since 2013. 

According to CoreLogic, this rise in migration “will continue to support housing demand.” 

Tasmania 

Tasmania has been a strong performer with regard to its property market, relative to the rest of Australia, with Hobart’s dwelling values rising 7% over the quarter. Regional Tasmania’s values climbed even higher, achieving a 7.7% increase over the same period, representing the highest increase in values outside a major city. 

Unlike the rest of Australia, Tasmania’s property listings were 46.1% lower than a year prior and are helping to fuel the growth in dwelling prices. On that note, sales volumes also decreased, presumably due to the reduced number of listings, falling 2.6% in the year. 

“Tasmania is the only state where sales volumes have fallen over the year, despite exhibiting some of the highest price increases. This implies lower sales volumes are supply related, rather than demand related.”

Additionally, prior to the pandemic and subsequent border closures, Tasmania experienced an influx of overseas migration, with 2,867 people moving to the state from overseas. This represents more than 2.8 times the decade average.

“Tasmania leads the states and territories in terms of favourable demographics for economic growth. The high levels of migration in the lead up to the pandemic reflect an uplift in business confidence and employment conditions in the lead up to the pandemic. Continued increases in dwelling values are expected across regions of Tasmania, as the economic recovery is supported by strong domestic tourism amid eased restrictions,” said the report. 

Northern Territory 

The Northern Territory property market boasts some of the lowest cost properties in Australia, with Darwin having the second-lowest median property value of any capital city and the lowest unit value of any capital city. 

Darwin’s dwelling values also enjoyed the highest annual increase over the 12 months to April, rising by 15.3% over the period. However, these increases are a far cry from the previous highs for both houses and units, which were in May of 2014 and 2010 respectively.

CoreLogic estimates that increases in rental prices have driven investors to the property market, which the report states are due to “population growth in the past few years against low levels of new investment purchases” that has placed “strong upward pressure on rent markets.”

Median rental prices rose in Darwin by $70 per week over the same period in the prior year, and favourable lending conditions have likely fuelled growth in demand to own property. This increase in demand to purchase property in the Northern Territory, according to CoreLogic, could catalyze a “virtuous cycle in economic conditions if jobs are created across fields such as construction, real estate, finance and furnishings.”

Construction for both houses and units increased in the December quarter by 83%, which suggests that this virtuous cycle may be beginning. Moreover, given that the Northern Territory has had the worst employment recovery in Australia after the pandemic, increased demand for property, and the ancillary jobs that come alongside this demand would provide a needed reprieve for the state. 

“Eased social distancing and border restrictions may boost domestic tourism to the Territory, which would help to gradually recover this sector, and could have positive flow-on effects for pockets of the property market,” said the report.  

Australian Capital Territory

The ACT has seen record highs in dwelling values for 20 consecutive months, with values now sitting 19.1% higher than April 2019, which was the previous record. 

The median value for Canberra properties rose by $91,240 over a 12 month period, which is the largest increase among the capital cities, an increase driven primarily by a combination of high demand and low property listings. Sales volumes increased by 10.7%, while the total stock sat -23.9% below the five-year average as of May 23rd.

In addition to this, Canberra has seen a recovery in its labour market with employment almost returning to pre-pandemic levels which have helped to fuel the property market in the ACT.

Most of the increased property values in the ACT were among houses, which increased by 7.6% compared with 2.6% for units over the three months to April, which may be exacerbated by the 4,041 approvals for unit construction compared with the 1,392 house approvals.

You can find out more about Australia’s property market on the CoreLogic website.