According to the Domain House Price Report for the September quarter 2020, the median house price increased across all capital cities in the three months ending September 2020, when compared with the same period the year before.
Moreover, house prices increased in every capital city except Melbourne on a quarter-on-quarter basis.
Unit prices were also marginally up nationally over the September quarter; however, Sydney, Melbourne, Canberra and Hobart all saw price drops.
According to Domain senior research analyst Dr Nicola Powell, the prices have been buoyed as buyers are lured back into the market by “low interest rates, government tax cuts and other incentives and the easing of coronavirus restrictions, as well as a change in housing preferences post-lockdown”.
“With fewer investors and foreign interest, first home buyers are taking advantage of the reduced competition, government incentives and low mortgage rates. With high vacancy rates, weak gross rental yields and fewer opportunities for capital gains, it may be some time before investors return,” she said.
Tasmania on the up
Tasmanian house prices were faring particularly well quarter-on-quarter, the report found, with median prices surging to record highs over the September quarter, reaching $555,754.
The increase is a 6.9 per cent from the previous quarter, marking the steepest increase over a quarter since late 2017.
According to Domain, house prices are now 15.7 per cent higher in Hobart than they were in the September quarter 2019.
The data echoes that from CommSec State of the States report, which found that Tasmanian finance commitments were up the most of all capital cities (up 39 per cent) and that the value of home loans in the state were up by 75.2 per cent on the decade average.
Dr Powell noted that Hobart is the third most affordable capital city to purchase a house, behind Perth and Darwin, but could soon see houses “become more expensive than Adelaide in the coming months, with just over $9,000 separating the two cities”.
According to Dr Powell, the value gap between the two states has hit the lowest on record.
However, while house prices were up, Hobart unit prices declined further over the September quarter, falling 9.1 per cent – the steepest drop of all the capital cities. The annual median value of units fell for the first time in a year, with a 1.5 per cent decline year-on-year.
According to the Domain report, the median unit value in the Tasmanian capital is now down to a one-year low of $384,672.
Dr Powell commented: “Hobart’s housing market has become highly fragmented in recent months, with houses outperforming units. The significant drop in unit values could be attributed to Hobart’s exposure to tourism, and reduced investor interest will be weighing on units values considering the vast majority are located in central Hobart.
“While Hobart has been a destination of choice given the relative affordability and lifestyle on offer, the health pandemic could accelerate this trend, as working from home becomes the norm for white-collar workers, which is likely to continue to support house prices,” she said.
Darwin houses no longer the most affordable
Behind Tasmania, Darwin was found to be the capital city with the largest increase in median house prices, rising 6.6 per cent on the previous quarter and 7.2 per cent year-on-year.
The median house price in the NT capital is now $539,463.
Unit values also grew in Darwin, rising to $326,268 median (up 4.5 per cent on the quarter and 7.8 per cent on the same period last year).
“The Northern Territory’s success in containing the virus has made it an attractive destination to relocate, and it is appealing for working remotely for desk-based workers. Residents may also be deterred from leaving, an exodus that has been a drag on population and housing demand in recent years,” she said.
“Darwin’s housing market has been the weakest capital city for price growth in recent years; it is now seeing some of the strongest growth,” the senior research analyst added.
In fact, the Domain report shows that Darwin saw the strongest annual gain in seven years for houses, which meant that it was no longer the capital city with the least expensive median house price.
On a median house price basis, Perth is now the capital city with the most affordable houses, with median house values there at $534,336.
While house prices in the WA capital recorded the strongest annual gain in six years, up 2.4 per cent to $534,336, (just over $12,000 above the mid-2019 trough), they were only 0.5 per cent up on the previous quarter.
Dr Powell commented that strong buyer demand – buoyed by government grants and support – has “rapidly absorbed newly listed homes for sale, and the total supply continues to shrink compared to last year.”
Canberra also recorded strong house growth (3.5 per cent increase on the quarter and 9.8 per cent growth on an annual basis), with median values rising to $817,810. This is the largest annual increase for nearly three years.
Dr Powell noted: “Over the past five years, house prices have risen 29.6 per cent, making Canberra the second best performer of all the capital cities during this time, behind only Hobart.”
However, unit prices in the ACT dropped by around 2 per cent in the September quarter (2.6 per cent on the year), to $447,143.
The Domain House Price Report revealed that Adelaide house and unit prices are at record highs, $564,927 and $331,553, respectively.
House prices grew 2.8 per cent over the September quarter – the largest jump since late 2013 and the strongest September performance in 11 years.
House prices have risen for four consecutive quarters, pushing annual gains to 6.8 per cent, the steepest in a decade.
Meanwhile, unit prices jumped 4.4 per cent over the September quarter, the steepest quarterly growth since mid-2013.
“Adelaide remains the second most affordable city to purchase a unit behind Darwin,” Dr Powell said, adding: “Adelaide could overtake Perth as the value gap between the two cities hits a 16-year low.”
According to the analyst, interest from prospective home hunters in purchasing housing in the SA capital has risen post-lockdown, and the owner-occupied-led housing market was less exposed to the changes in demand as a result of international border closures than the larger capital cities.
Sydney median house prices continue to grow, rising 1.2 per cent to $1,154,406 in the quarter (or 6.8 per cent on an annual basis).
“Houses have regained just over $13,000 of the almost $22,000 value lost over the June quarter and are now about $43,500 below the mid-2017 price peak,” Dr Powell noted.
“Despite house values rising modestly, the pace of quarterly growth was almost four times lower than the same time last year.”
Sydney unit prices also continued to decline over the September quarter, down 0.2 per cent to $732,423.
“The divergence of median house and unit prices has pushed the gap to the largest on record at 58 per cent,” Dr Powell said.
While Melbourne’s house prices remained flat quarter-on-quarter, the annual median house price grew by 1.6 per cent to $875,980.
Units fell a marginal 0.1 per cent to $536,659 over the September quarter.
Dr Powell said: “Melbourne house and unit prices showed incredible resilience over the strict lockdowns placed to combat COVID-19 outbreaks... Although this is the third consecutive quarter unit prices have fallen, the rate of decline has eased.”
She suggested that “a pullback in buyer and seller activity” had supported prices, as the market entered a sort of “hibernation” while others were supported with government support measures.
“The easing of restrictions has already revived activity thanks to pent-up demand that built during lockdown increasing in October,” she said.
In the Queensland capital, house prices increased 0.4 per cent to $596,316 over the September quarter, (or 3.7 per cent annually) while unit prices grew 1.7 per cent to $383,585.
This is the first quarterly growth since mid-2019 for units and reverses roughly one-third of the value lost over the June quarter.
The median value difference remains one of the largest on record at 55 per cent, slightly lower from last quarter.
“Brisbane’s property values remain resilient given the economic impact of COVID-19. Price growth had been more subdued in the lead-up to the COVID-19 outbreak compared to Sydney and Melbourne. Since the success in containing COVID-19 and restrictions have eased, property market confidence has lifted,” Dr Powell said.
[Related: Melbourne drags national housing value]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.