Property prices in every capital city increased over November, as the Reserve Bank cut interest rates to record lows and restrictions to limit the second wave of coronavirus outbreaks started to be lifted.
Nationally property prices increased 0.8 per cent last month, CoreLogic data released on Tuesday morning shows, marking the second consecutive month of a country-wide recovery. In October every city showed a bounceback in home values, except for Melbourne as the Victorian capital grappled with slowing the spread of the virus.
Property prices are now reviving in every capital city.Credit:Rob Homer
Major restrictions in Melbourne started to be lifted from early November, and property prices in the region increased by 0.7 per cent over the same period, though down 0.4 per cent over the quarter. Sydney property prices jumped 0.4 per cent with quarterly growth of 0.3 per cent.
While overall prices remain below where they were in March, on the current trajectory there could be a full recovery by February 2021 for most cities. Melbourne is down 5 per cent from its peak and will take longer, CoreLogic head of research Tim Lawless said.
House prices have been rising faster than apartments, but Melbourne units have so far been resilient despite high levels of new apartment developments in the inner city in recent years and struggling renters through the pandemic. Melbourne apartment prices increased 0.7 per cent in November, but there was a 0.7 per cent decline in Sydney. House prices jumped 0.6 per cent and 0.9 per cent for these capital cities respectively.
"We suspect the stronger trend in Melbourne unit values relative to houses could be short-lived unless overseas migration turns around sooner than expected which would help to shore up rental tenancy demand," Mr Lawless said. "This trend towards stronger conditions in detached housing markets is evident across most of the capital cities."
While affordable houses are driving the recovery, CoreLogic found signs of a resurgence among the top 25 per cent most expensive homes in Sydney. Melbourne has started to show similar improvement, but the bottom 25 per cent of the market is still outpacing the highest priced homes.
The strongest performing capitals for dwelling prices over November were Darwin and Canberra, both up 1.9 per cent each. Property prices have now hit record highs in Brisbane, Adelaide, Hobart and Canberra.
Capital city property values increased 0.7 per cent collectively, but were outstripped by regional Australia where prices jumped 1.4 per cent over the month.
The Reserve Bank slashed interest rates to a record low 0.1 per cent in November, down from 0.25 per cent, in a move to kickstart growth in the economy after the coronavirus-induced recession. Another boost to the property and housing construction sector is the federal government's $25,000 HomeBuilder grant for newly built homes and major renovations. The grant was extended on Sunday into the first three months of 2021, at the lower rate of $15,000, and more flexibility was provided in terms of price caps and timelines for building. The Morrison government estimates this will support an extra 15,000 home builds, bringing the total to 42,000.
Tenants face a mixed bag across the country, with major declines in rent for apartments in Sydney and Melbourne between March and November. Units are now 6.6 per cent cheaper to rent in Sydney and 7.6 per cent less in Melbourne. Houses were less affected during the crisis.
At the height of the pandemic, banking economists were tipping double-digit price falls in Melbourne and Sydney over the next two years. Since then the worst-case scenario for unemployment and the spread of the virus has not eventuated and tens of thousands of home owners who took mortgage holidays have resumed repaying their loans.
NAB chief economist Alan Oster has now revised his forecasts and expects rises of 5 per cent in 2021 and 6 per cent in 2022.
"We expect that lower interest rates for an extended period will be a key support to the housing market over the next couple of years, seeing a boost to prices across the country," he said.
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