The Australian housing market is thriving again, with the biggest monthly price gain in 17 years dispelled fears of a recession from Covid.
National home values rose 2.1% in February, the biggest increase since August 2003, CoreLogic Inc. data showed. published Monday. Capital prices gained 2%, led by Sydney and Melbourne.
“The Australian housing market is in the midst of widespread upheaval,” said Tim Lawless, head of research at CoreLogic. The quick wins were driven “by a combination of lower mortgage rates, improved economic conditions, government incentives and advertised low supply rates. “
As house prices soar from Singapore to Canada and the US, a return to tough times in Australia threatens a pile of already worrying household debt and makes it harder for steep young people on the building ladder. Sydney is the third lowest housing market in the world, and Melbourne the sixth, according to a report last week.
The country’s property values have plummeted again after the central bank reduced interest rates to a low and said they would stay there for at least three years. People are also looking for larger homes with space for work from home, while the rapid growth in prices for fear of losing out, puts buyers into the market. That could push home prices up 16% over the next two years, according to the Commonwealth Bank of Australia, the country ‘s largest mortgage lender.
“Auction permit rates are sitting at rates consistent with double-digit price growth,” said Gareth Aird, head of the Commonwealth Bank’s Australian economy. “History shows that people want to buy into a growing market. ”
Hot possession
An auction for a two-bedroom toilet on the inner bank of Sydney in Paddington on Saturday recently attracted more than 250 people. Bids started at A $ 1.4 million ($ 1.1 million) – $ 150,000 over the reserve and immediately knocked most buyers out of the race. He eventually sold for just a shy of A $ 1.7 million, A $ 450,000 above the reserve.
“We are seeing a huge increase in demand across all price points and all suburban areas,” said real estate agent Ben Collier, who handled the Paddington sale. Usually “you see different markets moving at different speeds, but they seem to be a bit more uniform right now. ”
In New Zealand, where home prices rose by 13% in January from a year earlier, the problem is so severe that the central bank must now be required by the government to consider the impact on house prices when they settle interest rates, a change opposed by the bank. The Reserve Bank of New Zealand is also reiterating lending restrictions on property investors in an effort to cool the market.
It is feared that the Australian housing market will be flooded with worrying sales as people thrown out of work by the pandemic have declined as the economy recovers faster than expected, and people resuming paying the mortgage after they were offered a six-month loan vacation last year.
Instead, supply shortages are helping fuel fuels prices. The number of homes advertised for sale in the first three weeks of February was down 26% from a year earlier, CoreLogic said.
“Housing investment is around low rates for this time of year and consumer demand is well above average,” Lawless said. “These conditions apply to sellers. Buyers seem to be against a sense of FOMO, which limits their ability to negotiate. ”
Home prices could rise by about 20% over this year and next, according to Westpac Banking Corp.
“The increase is supported by low interest rates; the optimistic expectation among lenders that these rates will remain low for years to come; adequate credit supply; and a growing economic backdrop as the rollout of vaccines promises to end the pandemic, ”the bank’s economists said in a report last week.