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<p>The Reserve Bank of Australia is under increasing pressure to raise the cash rate after headline and underlying inflation posted a stronger than expected result in the first quarter of 2022.</p><p>Concerns about the impact of inflation and potentially rapidly rising interest rates on the property market abound, but a myriad of micro and macro factors should be considered when weighing up the risk to housing values and possible mortgage stress. </p><p>What does this mean for the housing market?</p><p>“The strong inflation result puts additional pressure on the RBA to move on rates, particularly now that the underlying inflation rate is beyond the 2-3 per cent target,” CoreLogic’s head of research Eliza Owen said.</p><p>“While there are some potentially more transitory drivers of these high inflation numbers, such as fuel prices, other factors such as the high cost of new dwellings, rising rents and education costs take longer to have an impact. </p><p>“Considering the underlying inflation reading is likely to remain above the lower threshold of the 2-3 per cent target range, the RBA is facing mounting pressure to lift rates in the coming months. </p><p>“As we’ve noted in previous research, looking at the data historically suggests an inverse relationship between cash rate movements and property price movements. New demand for mortgages are expected to decline against a lift in the cash rate, adding further downwards pressure on the rate of housing price growth and prices later this year.”</p><p><strong>Impact of early and rapid rate hikes on house prices</strong></p><p>Even before the official cash rate target has been increased, a lift in average fixed mortgage rates, affordability constraints, lower consumer sentiment and higher levels of supply have started to put downward pressure on property prices, which have already<a href="https://www.corelogic.com.au/news-research/news/2022/Australias-smallest-cities-drive-growth-in-national-housing-values-as-Sydney-and-Melbourne-decline" data-mce-href="https://www.corelogic.com.au/news-research/news/2022/Australias-smallest-cities-drive-growth-in-national-housing-values-as-Sydney-and-Melbourne-decline"> </a>started to slip across Sydney and Melbourne, down -0.2 per cent and 0.1 per cent respectively in March.</p><p> Preliminary readings from CoreLogic’s daily HVI point to another monthly fall in housing values across these two cities in April.</p><p>A rate hike may trigger an earlier than expected decline in prices outside of Sydney and Melbourne, which can have a flow on effect for other cities to follow. </p><p><strong>Real house price falls</strong></p><p>The RBA noted in its financial stability review that a 2 percentage point rise in interest rates could see real housing prices fall by 15 per cent.</p><p> CoreLogic’s research director Tim Lawless says under this scenario, based on where national housing values were at the end of March, a 15 per cent drop in values would take housing values back to levels similar as March 2021. </p><p>A larger fall of 20 per cent could take national housing values back to similar levels as June 2017, while a smaller 10 per cent drop would see values at levels similar to June 2021 and a 5 per cent drop back to September 2021 levels.</p><p>However, the scenarios play out very differently across the capital cities, Lawless said.</p><p>“In markets where housing values have been rising faster, such as Brisbane and Adelaide, a 15 per cent decline would take housing values back to July and August 2021 levels respectively,” he says. </p><p>“In Melbourne, a 15 per cent drop could see values at a similar level as May 2017, or in the case of Perth, back to June 2009 levels.”<a href="//images.ctfassets.net/8pr762qjocl3/2Vxi4rPQwDgBtAGM2Pwjjt/b80939cb8775cd5a686c4d05fef52b85/RBA_governor_Philip_Lowe_has_warned_lenders_to_play_by_the_rules_as_the_housing_market_heats_up." target="_blank" rel="noopener" data-mce-href="//images.ctfassets.net/8pr762qjocl3/2Vxi4rPQwDgBtAGM2Pwjjt/b80939cb8775cd5a686c4d05fef52b85/RBA_governor_Philip_Lowe_has_warned_lenders_to_play_by_the_rules_as_the_housing_market_heats_up."></a></p><div id="5JAkPmWWf4CPAUj5MPv3xc"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2Vxi4rPQwDgBtAGM2Pwjjt/b80939cb8775cd5a686c4d05fef52b85/RBA_governor_Philip_Lowe_has_warned_lenders_to_play_by_the_rules_as_the_housing_market_heats_up." alt="RBA governor Philip Lowe has warned lenders to play by the rules as the housing market heats up." data-mce-src="//images.ctfassets.net/8pr762qjocl3/2Vxi4rPQwDgBtAGM2Pwjjt/b80939cb8775cd5a686c4d05fef52b85/RBA_governor_Philip_Lowe_has_warned_lenders_to_play_by_the_rules_as_the_housing_market_heats_up."></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ RBA governor Philip Lowe: the official rate could rise as early as next week. <br><br></span></div></div><p><strong>How quickly and sharply can prices fall?</strong></p><p>The extent of any housing downturn will be dependent on where rising interest rates land, but also on a variety of other factors, Owen says.</p><p>Helping to offset the downside risk of higher interest rates are extremely tight labour markets, improving economic conditions and recovering migration rates which will progressively add to housing demand. </p><p>“Since the late 1980s, Australia has experienced national downturns that have ranged in severity from a 1.0 per cent peak to trough decline in 2015-16, a temporary correction following the first round of credit tightening via APRA’s 10 per cent speed limit on investment lending, to an 8.4% drop in national values between late 2017 and mid-2019,” she says.</p><p><strong>Mortgage repayment buffers</strong></p><p>Despite the expected increase in mortgage rates there is no expectation of a material rise in distressed listings being added to the market due to unemployment set to trend below 4 per cent, Lawless says.</p><p>“The RBA has recently noted in their latest financial stability review the median repayment buffer for owner occupiers with a variable mortgage rate had grown to 21 months of scheduled repayments in February 2022, up from 10 months at the start of the pandemic,” he says.</p><p>“With a two-percentage point rise in interest rates, the median repayment buffer would reduce back to 19 months, which is still substantial. With the median household well ahead of their mortgage repayments, the risk of households falling behind on their mortgage repayments is reduced.”</p><div id="1uqJQh1WPoPlKqNKgymJpX"><picture><img src="//images.ctfassets.net/8pr762qjocl3/3pSS0BBpcr3EPF8GM7myTQ/f3253643a57ae95824650607b6eabe7e/land_market_story_hero.jpg" alt="Aerial view of Geelong where average land size and price have both increased. " data-mce-src="//images.ctfassets.net/8pr762qjocl3/3pSS0BBpcr3EPF8GM7myTQ/f3253643a57ae95824650607b6eabe7e/land_market_story_hero.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Despite the predicted rate increase, there has been no expectation of a rise in distressed listings.&nbsp;<br></span><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;"><br></span></div></div><p><strong>Fixed-rate insulation</strong></p><p>Another factor helping to offset the downside risk is the rise in borrowers who have taken on fixed rate mortgages. </p><p>Fixed rate borrowing peaked last year at around 45 per cent of new housing credit. </p><p>A larger portion of borrowers on fixed rate mortgage terms should provide some insulation to rising variable mortgage rates, at least until their fixed term expires, at which time there could be a refinance shock. &nbsp;</p><p><strong>Mortgage stress levels</strong></p><p>The RBA has also pointed out that non-performing housing loans comprised only 0.9 per cent of the mortgage portfolio at the end of last year, which is below pre-Covid levels.&nbsp; </p><p>Additionally, almost all the borrowers who took advantage of lender forbearance provisions during the pandemic are back in line with their repayment schedule.&nbsp;</p><p>Furthermore, APRA data on quarterly residential property exposures also highlights that the portion of outstanding loans 30-89 days past due was sitting at a recent low of 0.4 per cent through the end of 2021, half of the portion reported in March 2020.</p><p>“Such low numbers imply borrowers are entering a period of rising interest rates from a relatively strong foundation,” Lawless says.</p><p><strong>Vulnerable households</strong></p><p>Households that have smaller or no savings buffers built up could be more vulnerable to mortgage distress as interest rates move higher, however a trend towards materially higher mortgage arrears or default would need a catalyst of worsening labourmarket conditions and higher rates of unemployment. &nbsp;</p><p>“With labourmarkets so tight, and likely to tighten further, the risk of higher unemployment remains low,” Lawless says.</p><p>“Additionally, a more substantial rise in wages growth amid such low unemployment should also allow higher risk borrowers to maintain their repayments.”</p><p><strong>Serviceability assessments</strong></p><p>Mortgage distress should also be minimised to some extent by mortgage serviceability assessments at the time of the loan origination. </p><p>All borrowers would have been assessed to repay their mortgage under a scenario of mortgage rates being 2.5 percentage points higher than the origination rate, and since October last year, borrowers were being assessed at mortgage rates of 3 percentage points higher.</p><p>Under these serviceability scenarios, borrowers should be able to accommodate higher mortgage repayments costs, although such as rapid rate of inflation could create some challenges for borrowers with thinly stretched budgets.</p>

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<p>Home ownership in Australia is embedded in <a data-mce-href="https://www.rba.gov.au/publications/bulletin/2019/mar/wealth-and-consumption.html" href="https://www.rba.gov.au/publications/bulletin/2019/mar/wealth-and-consumption.html" target="_blank" rel="noopener">wealth accumulation, security</a> of tenure and <a data-mce-href="https://www.researchgate.net/profile/Bruce-Bradbury/publication/227320846_Home_Ownership_as_a_Crumbling_Fourth_Pillar_of_Social_Insurance_in_Australia/links/577c646608aec3b743367262/Home-Ownership-as-a-Crumbling-Fourth-Pillar-of-Social-Insurance-in-Australia.pdf" href="https://www.researchgate.net/profile/Bruce-Bradbury/publication/227320846_Home_Ownership_as_a_Crumbling_Fourth_Pillar_of_Social_Insurance_in_Australia/links/577c646608aec3b743367262/Home-Ownership-as-a-Crumbling-Fourth-Pillar-of-Social-Insurance-in-Australia.pdf" target="_blank" rel="noopener">security in retirement</a>.</p><p>In other words, home ownership in Australia makes life a lot easier in the long run than renting.</p><p>While <a data-mce-href="https://www.genworth.com.au/media/ie0bizm1/media-release.pdf" href="https://www.genworth.com.au/media/ie0bizm1/media-release.pdf" target="_blank" rel="noopener">surveys</a> indicate most Australians want to own their own home, the latest available data shows only <a data-mce-href="https://www.abs.gov.au/statistics/people/housing/housing-occupancy-and-costs/latest-release" href="https://www.abs.gov.au/statistics/people/housing/housing-occupancy-and-costs/latest-release" target="_blank" rel="noopener">66 per cent of households do</a>.</p><p>As we head into the next election, both the ALP and the Coalition have included some expansion of the First Home Loan Deposit Scheme (FHLDS) in their policy platforms.</p><p>Labor has proposed a First Home Buyer Support Scheme, which will review price caps on a six-monthly basis, and extend 10,000 government guarantees to regional Australian applicants.</p><p>The Coalition would also reserve 10,000 home loan guarantees for regional Australians, but would expand eligibility in the regions to non-first homebuyers, and limit purchases to new homes.</p><div title="Page 1"><p>The Coalition would also increase the current 10,000 regular FHLDS places to 35,000 per year.</p><p>The family home guarantee would also be increased to 5,000 places per year, creating a total of 50,000 new low-deposit guarantees in 2022 alone.</p><div title="Page 1"><p>In its current form, the FHLDS allows eligible borrowers to take out a mortgage with a deposit as small as 5 per cent, without paying lenders mortgage insurance. This is done by the government guaranteeing up to 15 per cent of the loan.</p><p>Applications are limited to singles on an income of up to $125,000, or couples on $200,000.</p><p><a href="https://www.nhfic.gov.au/what-we-do/property-price-caps/" target="_blank" rel="noopener" data-mce-href="https://www.nhfic.gov.au/what-we-do/property-price-caps/">Purchases</a> under the scheme are limited to between $350,000 in some regions, to up to $950,000 in Sydney for new homes.</p><p>But whether the scheme is ‘good’ or ‘bad’ is a really complex question. Some of the pros and cons of the scheme are outlined below.</p><h2><strong>Pro: It roughly quarters the time it would take to save a deposit<br><br></strong></h2><p><strong>Figure 1.0. Months of savings required for a 5% versus a 20% deposit</strong></p><div><div id="4BU3DeWizSVmmLLj6ToHLQ"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2LEohcrdSx5P6LzFPavtK3/219749ddf46208c60caa9a8133f705b4/Screen_Shot_2022-03-31_at_3.08.32_pm.png" alt="Figure 1.0. Months of savings required for a 5% versus a 20% deposit" data-mce-src="//images.ctfassets.net/8pr762qjocl3/2LEohcrdSx5P6LzFPavtK3/219749ddf46208c60caa9a8133f705b4/Screen_Shot_2022-03-31_at_3.08.32_pm.png"></picture><div><sup><sub>^Source: Corelogic&nbsp;</sub></sup></div><div><br></div><div><sup><sup><sub> </sub></sup></sup><div title="Page 2"><div><div><div><p>Based on the median dwelling value across Australia at the end of February ($728,034), Corelogic estimates it would take around 2.3 years for the median household to save a 5 per cent deposit on a home.</p><p>A 20 per cent deposit, which is the level allowing borrowers to <span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;" data-mce-style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">avoid lenders mortgage insurance (LMI), would take around 8.8 years.</span></p></div></div></div><div><p>This could cut 6.5 years in the rental market, which at current weekly rent values on the median dwelling in Australia, equates to almost $160,000.</p><p>The savings on LMI could be upwards of $30,000 on the median Australian dwelling value with a 5 per cent deposit.<br></p><div title="Page 2"><h2><strong>Con: Interest costs would be higher</strong></h2><div title="Page 2"><div><div><div><p><br>Understanding the concept of interest is crucial to do a thorough cost-benefit analysis of the scheme.</p><p>Taking the median dwelling value and the current average mortgage rate for principal and interest owner-occupier borrowers (2.44 per cent), the difference in interest costs between a 5 per cent deposit and a 20 per cent deposit is about $37,000 over the life of the loan.</p><p>With the cash rate likely to rise sometime in the next 12 months, this will exacerbate interest between those on a 5 per cent and 20 per cent deposit loan.</p><p>Understanding interest is extremely important when taking on large mortgages, especially when targeting these schemes to younger Australians and women, where rates of financial literacy among these groups tend to be lower.</p><p>While the interest costs on a 5 per cent deposit home loan may be larger, it is important to weight them against the cost of not being in the market.</p><p>These costs include any increase (or decrease) in purchase prices and the cost of renting</p></div></div></div></div><p><strong>Principal and interest repayments on a 5 per cent vs 20 per cent deposit&nbsp;</strong></p><div id="7gVONXhLFf1Q2eaeYJHlyb"><picture><img src="//images.ctfassets.net/8pr762qjocl3/4tgvSZzbSaDtKAztYivDPH/24a4a38d59c7a74c90d2b1a80794734f/Screen_Shot_2022-03-31_at_3.12.35_pm.png" alt="Principal and interest repayments on a 5% vs 20% deposit" data-mce-src="//images.ctfassets.net/8pr762qjocl3/4tgvSZzbSaDtKAztYivDPH/24a4a38d59c7a74c90d2b1a80794734f/Screen_Shot_2022-03-31_at_3.12.35_pm.png"></picture></div><p><sup><sub>^Source: Corelogic&nbsp;</sub></sup>&nbsp;</p><p><sup><sub> </sub></sup></p><div title="Page 2"><h2><strong>Pro: More than one in three establish properties qualify</strong></h2><p><br></p><div title="Page 2"><p>Based on the scheme’s current price caps for established properties, CoreLogic estimates around 35.4 per cent of Australian dwellings qualify.</p><p>If prices decline, this could free up more dwellings for applicants, while the reverse is true if prices continue to rise.</p><div title="Page 2"><h2><strong>Con: Price thresholds are hard to determine</strong></h2><p><br>A decline in home values would increase the number of properties available under the FHLDS, however Australia’s rapidly changing and diverse housing market means stock availability varies widely by region.</p><strong>Portion of properties valued under the current FHLDS thresholds by region<span style="font-family: -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif;" data-mce-style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;"><br></span></strong><div id="2Dg1Fhg0FCDvDeB9SIW2YE"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2fkHRRV0uZRVoEACMFWIYS/dd6e4339326dde137f27156e68bcadff/Screen_Shot_2022-03-31_at_3.14.16_pm.png" alt="Portion of properties valued under the current FHLDS thresholds by region" data-mce-src="//images.ctfassets.net/8pr762qjocl3/2fkHRRV0uZRVoEACMFWIYS/dd6e4339326dde137f27156e68bcadff/Screen_Shot_2022-03-31_at_3.14.16_pm.png"></picture><div><sup><sub>^Source: Corelogic&nbsp;</sub></sup></div><div><br></div><div><sup><sup><sub> </sub></sup></sup><div title="Page 3"><div><div><div><p>The current portion of valuations that sit under the established purchase price thresholds for the scheme in each region, as at the end of March.</p><p>CoreLogic’s analysis shows the proportion of qualifying properties ranged from from up to 66.3 per cent of dwellings in Perth, to just 10.7 per cent in the ACT.</p><p>Purchasing thresholds <a href="https://www.nhfic.gov.au/what-we-do/property-price-caps/" target="_blank" rel="noopener" data-mce-href="https://www.nhfic.gov.au/what-we-do/property-price-caps/">have been adjusted higher</a> through the 2021-22 FY, and Labor has noted it intends to r<a href="https://alp.org.au/policies/regional-first-home-buyer-support-scheme" target="_blank" rel="noopener" data-mce-href="https://alp.org.au/policies/regional-first-home-buyer-support-scheme">eview purchasing caps on the scheme on a six-monthly basis</a>, so this policy can be adapted to changing market conditions.</p></div></div></div></div></div></div><div title="Page 3"><h2><strong>Pro: It's not a revolution, but its pragmatic</strong></h2><p><br></p><p>The FHLDS is not revolutionary. Where the 2016 and 2019 Federal elections saw Labor campaign on changes to negative gearing and capital gains concessions, both parties are trying to assist first homebuyers in getting over the deposit hurdle, “<a href="https://www.liberal.org.au/latest-news/2019/05/12/helping-australians-buy-their-first-home" target="_blank" rel="noopener" data-mce-href="https://www.liberal.org.au/latest-news/2019/05/12/helping-australians-buy-their-first-home">while protecting the value of homes</a>”.</p><p>To-date, the scheme has seen very high demand. Within four months of commencement, <a href="https://treasury.gov.au/sites/default/files/2021-10/p2021-217760.pdf" target="_blank" rel="noopener" data-mce-href="https://treasury.gov.au/sites/default/files/2021-10/p2021-217760.pdf">more than 8,000 places in the scheme had</a><br><a href="https://treasury.gov.au/sites/default/files/2021-10/p2021-217760.pdf" target="_blank" rel="noopener" data-mce-href="https://treasury.gov.au/sites/default/files/2021-10/p2021-217760.pdf">been taken up</a>. ABS data also shows first homebuyer loans surged from the start of 2020, coinciding with the start of the scheme</p><div title="Page 3"><p><strong>Number of FHB owner occupier loans secured, nationally</strong></p><div id="3SL9K4vsi79fb9Bg24u1Pr"><picture><img src="//images.ctfassets.net/8pr762qjocl3/14RI7jehZMnI8rDEmRyZtw/4b4a964f2be00a9a7829af8afb8d4fec/Screen_Shot_2022-03-31_at_3.18.17_pm.png" alt="Number of FHB owner occupier loans secured, nationally" data-mce-src="//images.ctfassets.net/8pr762qjocl3/14RI7jehZMnI8rDEmRyZtw/4b4a964f2be00a9a7829af8afb8d4fec/Screen_Shot_2022-03-31_at_3.18.17_pm.png"></picture><div><sup><sub>^Source: ABS&nbsp;</sub></sup></div><div><sup><sup><sub> </sub></sup></sup><div title="Page 4"><h2><strong>Con: It could to better on the equity front</strong></h2><p><br>Australia’s rate of home ownership has declined from around 71 per cent in 1995, to 66 per cent in 2016. But as noted in Grattan research, <a href="https://www.afr.com/policy/economy/shared-equity-scheme-will-solve-affordability-crisis-grattan-20220218-p59xq6#:~:text=Struggling%20home%20buyers%20could%20get,prices%20and%20falling%20home%20ownership." target="_blank" rel="noopener" data-mce-href="https://www.afr.com/policy/economy/shared-equity-scheme-will-solve-affordability-crisis-grattan-20220218-p59xq6#:~:text=Struggling%20home%20buyers%20could%20get,prices%20and%20falling%20home%20ownership.">lower rates of home ownership are associated with lower income</a>.</p><p>This means addressing low rates of home ownership should target lower income&nbsp;households.</p><p>The income thresholds for the FHLDS are relatively high. For example, <a href="https://www.abs.gov.au/statistics/economy/finance/household-income-and-wealth-australia/2017-18#data-downloads-fact-sheets" target="_blank" rel="noopener" data-mce-href="https://www.abs.gov.au/statistics/economy/finance/household-income-and-wealth-australia/2017-18#data-downloads-fact-sheets">ABS Household Income and Wealth data</a> showed that in 2017-18, a gross household income of $200,000 per year placed households in the top 20 per cent of incomes, and that median household incomes were closer to $88,000.</p><p>Couples earning up to $200,000 can qualify for the FHLDS, though figures would suggest their risk of missing out on home ownership without it is lower.</p><p>According to <a href="https://www.nhfic.gov.au/media/1473/20200826-nhfic-fhlds-research-report.pdf" target="_blank" rel="noopener" data-mce-href="https://www.nhfic.gov.au/media/1473/20200826-nhfic-fhlds-research-report.pdf">NHFIC</a> however, the highest concentrations of guarantees have been below the income thresholds through 2019-20, at $60- $80,000 for singles and $100-$125,000 for couples.</p><p>The purchase price caps may also have a self-selecting effect, with those on higher incomes seeking more expensive homes.</p><h2><strong>Pro and Con: It will increase housing demand at a time when the housing market is cooling</strong></h2><div title="Page 4"><p><span style="font-family: -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif;"><br>Historically, targeted first homebuyer grants have incentivised buyers. The temporary boost to the first home owner grant increased housing activity around the time of the global financial crisis in 2008, when a lift in real estate transactions positively impacted the economy.</span><br></p><div title="Page 4"><p>Expanding the FHLDS could increase first homebuyer numbers at a time when the housing market outlook is uncertain. Alternatively this could increase demand for more affordable properties, increasing prices in this segment.</p><div title="Page 4"><h2><strong>A final word on first home buyers</strong></h2><p><br></p><p>Should first homebuyers be worried about the prospect of a falling market? Probably not.</p><p>The risk of negative equity is mitigated by the fact that owner-occupiers hold their properties for long periods of time, and Australia’s labour market is at its strongest level in 50 years. Corelogic’s resale analysis shows owner-occupiers have a median hold period of around nine years.<br></p><p>Historic performance in the Australian housing market has shown peak-to-trough declines last an average of 12 months nationally.</p><p>The RBA also recently produced <a href="https://www.rba.gov.au/publications/bulletin/2022/mar/are-first-home-buyer-loans-more-risky.html" target="_blank" rel="noopener" data-mce-href="https://www.rba.gov.au/publications/bulletin/2022/mar/are-first-home-buyer-loans-more-risky.html">analysis showing first home buyers were at no greater risk of mortgage arrears than other borrowers</a>. Negative equity becomes a greater risk when mortgage serviceability deteriorates. This is why a thorough assessment of borrowers is so important in an environment where rates are set to rise.<br></p><p>If there is a limitation to expanding the FHLDS, it is probably in the details of refining income and price thresholds, rather than major&nbsp;default risks for first home buyers.</p><p>Regardless of which political party wins the 2022 election, an objective of housing policy should also focus on more equitable housing outcomes across income brackets, including adequate provision of affordable housing for thosewho are unlikely to achieve home ownership.</p></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div>

As we head toward a federal election, both the ALP and the Coalition have included expansion of the First Home Loan Deposit Scheme in their policy platforms. Here are the pros and cons of their proposals...

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<p>The global pandemic has catalysed remarkable shifts in the Australian housing market.</p><p>From the temporary shutdown of cities to an unprecedented monetary policy strategy, a new-found popularity of regional and low-density housing preferences and the introduction of various government home buying incentives, the Covid period has had distinct impacts on the composition of buyers and the dynamics of the housing market.</p><p>Here are six of the major impacts on the Australian housing market two years on.</p><p><strong>1. Australian home values rose 25 per cent to record highs</strong></p><p>Despite an initial dip, housing values rose 24.6 per cent between the end of March 2020 and February 2022.</p><p>The table below shows the cumulative change in the national CoreLogic Home Value Index since the onset of Covid.</p><p>The index had a relatively small decline at the onset of Covid, with sales and listings volumes being far more impacted than prices.</p><p>National home values declined -2.1 per cent between April 2020 and September 2020, before soaring amid low interest rates, high household savings, government grants and a sharp reduction in the supply of housing.</p><p>By February 2022, CoreLogic estimated the total value of residential real estate to be $9.8 trillion, up from $7.2 trillion at the onset of the pandemic. The median Australian dwelling value increased $173,805, to $728,034.</p><p><strong>Cumulative change in home value index</strong></p><div id="1T04OZaixKa10LOpckDLbU"><picture><img src="//images.ctfassets.net/8pr762qjocl3/1OS1nQaSdokIVz3LPeSP56/87f729ed33d1db51f864ecd31ccbb994/Screen_Shot_2022-03-17_at_11.17.32_am.png" alt="Corelogic Covid 6 ways: Cumulative change in home value index " data-mce-src="//images.ctfassets.net/8pr762qjocl3/1OS1nQaSdokIVz3LPeSP56/87f729ed33d1db51f864ecd31ccbb994/Screen_Shot_2022-03-17_at_11.17.32_am.png"><br><br></picture><p><strong>2. First homebuyer activity spiked</strong></p></div><p>First homebuyers were a sizable part of housing demand at the start of the pandemic.&nbsp;</p><p>This cohort took advantage of more affordable housing options following the earlier downturn, along with record low mortgage rates and government incentives.</p><p>ABS data shows the number of new loans to first homebuyers increasing during the housing market downswing from 2017 to 2019 (graph below).</p><p>From June 2020, first home buyer activity surged amid the introduction of the HomeBuilder scheme, used alongside the First Home Loan Deposit Scheme, as well as other state-based grants and stamp duty concessions for first homebuyers.</p><p>The result was a spike in first homebuyer activity, which peaked in January 2021. The spike mirrors first homebuyer participation in 2009-10, which marked a temporary boost to the First Homeowner Grant.</p><p>Since the January 2021 peak, first home buyer activity has diminished, reflecting higher barriers to entry as housing values substantially outpace incomes.</p><p>As of January 2022, loans to first homebuyers numbered 10,964, above the decade average of 8682.</p><p>Proportionally, first homebuyer lending comprised 24 per cent of owner-occupier mortgage demand in January, which is in-line with the decade average.</p><p>This may have implications for rates of home ownership, which may see an increase on ABS 2016 census numbers.</p><p>While the rise in home values has created a greater deposit hurdle for those looking to enter the market, various government schemes introduced throughout 2020 helped to incentivise first homebuyer participation.</p><p><strong> Number of FHB Owner-Occupier Loans, Australia<br></strong></p><div id="EuDoupVLfUGtRvrB2XDLb"><picture><img src="//images.ctfassets.net/8pr762qjocl3/4HSo9rmSZWgwn3ogUfi1ED/5b6a8e9bda8f9e46e9b21027dd54813f/Screen_Shot_2022-03-17_at_11.17.43_am.png" alt="Corelogic Covid 6 ways: Figure 2.0 Number of FHB Owner-Occupier Loans, Australia" data-mce-src="//images.ctfassets.net/8pr762qjocl3/4HSo9rmSZWgwn3ogUfi1ED/5b6a8e9bda8f9e46e9b21027dd54813f/Screen_Shot_2022-03-17_at_11.17.43_am.png"></picture><div><br></div></div><p><strong>3. Rents rose 11.8pc to record highs, gross yields fell to record lows</strong></p><p>The CoreLogic Rent Value Index, which tracks changes in rental valuations over time, has also surged to new record highs.</p><p>The graph below shows the change in the national rent index since the end of March 2020. While rents saw a mild decline of -0.8 per cent between March and August 2020, there was a swift recovery in these values, followed by a surge through 2021.</p><p>There are multiple reasons rents have risen. Investor activity had been relatively subdued between 2017 and mid-2020, contributing to rental supply constraints.</p><p>Rental supply may also have been eroded through the rise of rental services like Airbnb, which have enabled property owners to pivot to the short-term rental accommodation market.</p><p>This latter trend may have been particularly prevalent in tourism destinations across Australia, some of which have flourished amid a rise in domestic tourism in the past two years.</p><p>For investors who have recently purchased long-term rental accommodation, rents may have increased due to higher purchasing prices.</p><p>Over the course of 2021, annual rent value growth was at its highest levels since 2008.</p><p>Across Australia, median advertised rents since March 2020 have increased $30 per week to $470 per week.&nbsp;</p><p>The headline numbers hide the diversity of rental conditions.&nbsp; Through the pandemic, there has been a clear shift in rental preferences towards lower density housing options, where the upwards pressure on rents has been more substantial.&nbsp;</p><p>This trend has evolved over the past year, with rental affordability gradually deflecting more demand towards higher density rental options where the cost of renting is more affordable.&nbsp;</p><p>However, gross rental yields have declined. This is because gross rental yields are a portion of the purchase price of a property, and purchase prices of properties have grown 24.6 per cent since March 2020, outpacing the 11.8 per cent rise in rents.</p><p>Nationally, gross rental yields have fallen from 3.8 per cent at March 2020 to a record low 3.21 per cent as of February 2022. As housing growth has started to slow, this record-low gross rent yield figure appears to have begun stabilising.</p><p><strong>Cumulative change in home value index</strong></p><div id="7nteo6ojBXTadutBJr72IH"><picture><img src="//images.ctfassets.net/8pr762qjocl3/byzU2Gtd0WWIazTfT1M36/f4fa2533e9202a09edc90e021c8f2546/Screen_Shot_2022-03-17_at_11.18.31_am.png" alt="Corelogic Covid 6 ways: Cumulative change in home value index" data-mce-src="//images.ctfassets.net/8pr762qjocl3/byzU2Gtd0WWIazTfT1M36/f4fa2533e9202a09edc90e021c8f2546/Screen_Shot_2022-03-17_at_11.18.31_am.png"></picture><div><br></div></div><p><a href="//images.ctfassets.net/8pr762qjocl3/byzU2Gtd0WWIazTfT1M36/f4fa2533e9202a09edc90e021c8f2546/Screen_Shot_2022-03-17_at_11.18.31_am.png" target="_blank" rel="noopener" data-mce-href="//images.ctfassets.net/8pr762qjocl3/byzU2Gtd0WWIazTfT1M36/f4fa2533e9202a09edc90e021c8f2546/Screen_Shot_2022-03-17_at_11.18.31_am.png"></a><strong>4. Housing debt levels hit record highs</strong></p><p>Rapid increases in housing and rent values in the past two years was largely the result of a sizable reduction in the official cash rate.</p><p>With the RBA setting the official cash rate target at 0.1 per cent since November 2020, lower debt costs enabled borrowers to access more credit.</p><p>As of January, total outstanding housing credit sat at a record high of over $2 trillion, according to the RBA, while the ratio of housing debt to household income was at a record high 140.5 per cent through the third quarter of (graph below).</p><p>This is up from 139.2 per cent in March 2020.While total outstanding credit reached over $2 trillion in January, ABS data shows monthly new finance borrowed for the purchase of property continued to hit fresh record highs through January 2022, at $33.7 billion.</p><p>High levels of housing debt, particularly where it has grown faster than incomes, creates a vulnerability in the Australian economy.</p><p>However, it is important to frame debt levels in the context of high asset values, and relatively low interest costs. RBA data shows housing interest payments to income have fallen to their lowest levels since 1999, and household debt has trended lower as a portion of housing values.</p><p><strong>Ratio of housing debt to annualised household disposable income</strong></p><div id="6Ce49EyQJfVrIdfCJOMQsR"><picture><img src="//images.ctfassets.net/8pr762qjocl3/21B1yGEwT83k2RHWghyo5E/2375910cfc5dcd7c365156ed4c7c8c34/Screen_Shot_2022-03-17_at_11.19.07_am.png" alt="Corleogic Covid 6 ways: Ratio of housing debt to annualised household disposable income" data-mce-src="//images.ctfassets.net/8pr762qjocl3/21B1yGEwT83k2RHWghyo5E/2375910cfc5dcd7c365156ed4c7c8c34/Screen_Shot_2022-03-17_at_11.19.07_am.png"></picture><div><br></div></div><p><strong>5. The premium of house prices compared to units hit record highs</strong></p><p>Both the composition of the buyer pool and the impacts of Covid may have contributed to a record gap between house and unit values.</p><p>&nbsp;Investors, who may have a preference for units, have been a relatively small part of demand through the upswing.</p><p>Additionally, detached houses may have been in higher demand as Australians spent more time at home through the pandemic.</p><p>Government policies such as the HomeBuilder grant may have also contributed to increased detached housing demand, due to tight construction timelines to qualify.</p><p>The result is a record high gap between house and unit values. The graph below shows the median house value across Australia was at a record high 29.8 per cent above the median Australian unit value, with a dollar value premium of around $182,000.</p><p>This is up from just 8.5 per cent in March 2020, or a dollar value premium of around $44,000 for houses.</p><p>Also below, the second graph shows the dollar-value premium of median house values over median unit values in each of the capital cities, with most cities seeing a substantial increase in this value since March 2020.. </p><p><strong>How much more expensive are houses than units?</strong></p><div id="1TpDAaaEeGK1ksfmvvtEkf"><picture><img src="//images.ctfassets.net/8pr762qjocl3/1575mPeicfVTiaJ3y2L4xW/7e8ec4693cfd822886bb12a5eee188db/Screen_Shot_2022-03-17_at_11.19.18_am.png" alt="Corelogic covid 6 ways: How much more expensive are houses than units?" data-mce-src="//images.ctfassets.net/8pr762qjocl3/1575mPeicfVTiaJ3y2L4xW/7e8ec4693cfd822886bb12a5eee188db/Screen_Shot_2022-03-17_at_11.19.18_am.png"></picture><div><br></div></div><p><strong>How much more expensive are houses than units?</strong></p><div id="29Iu3F1IhE0FEbOX0ohjWk"><picture><img src="//images.ctfassets.net/8pr762qjocl3/5fhDSlGLMOa5psvJcSVgTe/e7105ae803682b1f329d5085c3d32393/Screen_Shot_2022-03-17_at_11.19.25_am.png" alt="Corelogic covids 6 ways: How much more expensive are houses than units? " data-mce-src="//images.ctfassets.net/8pr762qjocl3/5fhDSlGLMOa5psvJcSVgTe/e7105ae803682b1f329d5085c3d32393/Screen_Shot_2022-03-17_at_11.19.25_am.png"></picture><div><br></div></div><p><strong>6. The rise of the regions</strong></p><p>Migration trends over 2020 and 2021 revealed an uptick in the volume of people leaving cities for regions outside of lockdown periods, and a decline in people leaving regions for cities.</p><p>The result has been higher than normal housing demand against unusually low levels of listings across regional Australia, in both the sales and rental market. Value gains across regional Australian dwelling values has been almost 40 per cent since March 2020, while capital city home values have increased around 21% (Figure 7.0).</p><p>In lifestyle regions, which have become intensely popular in the past two years, new million-dollar markets have been created across areas such as the Sunshine Coast, the Illawarra and the Gold Coast, where median house values now sit above the million-dollar mark. </p><p><strong>Cumulative change in home value index—capital cities vs regions</strong></p><div id="2LZSp42SNCtYp9HADYBy1m"><picture><img src="//images.ctfassets.net/8pr762qjocl3/41TE6I824NmcKN01fdDF8y/eba0f8496885ac304b7b770f320acee3/Screen_Shot_2022-03-17_at_11.22.01_am.png" alt="Corelogic covid 6 ways: Cumulative change in home value index—capital cities vs regions" data-mce-src="//images.ctfassets.net/8pr762qjocl3/41TE6I824NmcKN01fdDF8y/eba0f8496885ac304b7b770f320acee3/Screen_Shot_2022-03-17_at_11.22.01_am.png"></picture><div><br></div></div><p><strong>Where to from here? </strong></p><p>The current housing market upswing has delivered extraordinary value gains, providing a significant wealth boost for home owners, but larger hurdles to enter the market for non-home owners.</p><p>But since April of 2021, monthly gains in national home values have softened. Arguably, there are more headwinds than tailwinds now stacked against continued growth in the property market, with the potential for sooner-than expected cash rate increases, affordability constraints, and weakening consumer sentiment slowing demand.</p><p>While some structural shifts through the pandemic, such as remote work, may sustain demand in regional Australia long term, it is likely that housing values will start to decline on a fairly broad basis later this year.</p>

The global pandemic caused remarkable shifts in the Australian housing market. Two years on, here are six ways Covid has altered the sector…

The property market’s fastest upswing on record, accompanied by a rapid increase in housing credit and highly elevated sales volumes, has significantly supported Australia’s post-pandemic economic recovery.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The property market’s fastest upswing on record, accompanied by a rapid increase in housing credit and highly elevated sales volumes, has significantly supported Australia’s post-pandemic economic recovery.</p><p>Corelogic’s latest economic and property review explores the major housing market trends to the end of November 2021, providing a national overview of the $9.4-trillion sector’s performance within the current economic landscape.</p><p>A summary of the housing finance environment, and a review of housing and economic performance in each state and territory is also included.</p><p>National dwelling values rose 22.2 per cent, comprised of a 25.2 per cent lift across regional Australia and a 21.3 per cent rise in combined capital city dwelling values in the 12 months to November 2021. </p><p>In the same period, there were an estimated 614,635 dwelling sales across the country, which is the highest annual sales volume since December 2003.</p><p>Strong housing market activity has been supported by a combination of factors, including low interest rates and relatively subdued levels of available stock.</p><p>Housing-related government support such as the First Home Loan Deposit and HomeBuilder schemes and non-housing fiscal stimulus, such as JobKeeper, helped many Australians service housing costs such as rents and mortgage repayments.</p><p>Alongside home loan repayment deferrals, these household support measures stabilised the supply-side of housing through 2020 by preventing distressed sales, and these repayment deferrals were re-introduced amid lockdowns in 2021.</p><p>Australia’s household savings rate also increased to 23.6 per cent through to June 2020 against a then-decade average of 6.9 per cent on the back of strict pandemic lockdowns and inhibited short-term consumption spending.</p><p>It is probable that lower mortgage rates, and an observed economic and housing market recovery from the end of 2020, contributed to buoyant housing demand, particularly in those cities impacted by lockdowns in 2021.</p><p>However, the nature of restrictions also affected housing dynamics, with sales volumes falling far more dramatically in areas where physical inspections of property were prohibited.</p><p>Australian rent values have also seen a strong uplift at the national level, increasing 9.4 per cent in the 12 months to November 2021, which is the highest rate of annual appreciation since January 2008.</p><p>However, there is evidence of growth rates easing in the Australian housing market and the broad-based upswing of early 2021 was no longer applicable due to the variation in dynamics across the states and territories.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/015ee1e7-2fe0-498a-840f-ef2ebb88c87f.jpg" width="920"/></picture><div><span style="align-content:center;opacity:0.8">▲ The pace of Australian home values rises is expected to slow next year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Momentum in the housing market is slowing quickly in Sydney and Melbourne, which is likely due to a relatively high number of listings now on the market and severe affordability constraints.</p><p>Across Melbourne, demand appears to be shifting to more affordable areas of the city, with lower-value dwelling markets seeing a pick-up in quarterly growth rates. Similarly, value gains are accelerating across regional NSW, while affordability weighs on dwelling demand across Sydney.</p><p>In Brisbane and Adelaide value growth rates have reached the highest levels seen in more than a decade and are continuing to accelerate.</p><p>In the ACT, the concentration of housing demand has shifted to the unit sector as the median house value closes in on the $1-million benchmark and investor participation rises.</p><p>But the high value growth and above-average rates of housing turnover recorded in 2021 are unsustainable, particularly with forecast headwinds such as recent changes to mortgage lending conditions and signs of interest rate increases, both of which are likely to slow housing demand.</p><p>Listings levels are normalising across Sydney and Melbourne, and affordability constraints are worsening across most housing markets.</p><p>As a result, it is expected that 2022 will see far milder rates of appreciation in Australian dwelling values.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/6b1fb744-9b68-46e5-af23-850df0569a98.jpg" width="900"/></picture><div><span style="align-content:center;opacity:0.8">▲ Sydney’s upswing in values began in October last year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><br><strong>New South Wales</strong></h2><p>The NSW property market has been in upswing since October 2020, with state-wide dwelling values increasing 26.5 per cent in the 12 months to November 2021. </p><p>This is the second-highest uplift of the states and territories (behind Tasmania, where dwelling values increased 28.6 per cent).</p><p>The highest annual growth rates have been in premium lifestyle markets including the Southern Highlands and Shoalhaven (36.6 per cent), Sydney’s Northern Beaches (36.4 per cent), the Central Coast (34.1 per cent) and <a href="https://www.theurbandeveloper.com/articles/sydney-housing-market-update">Sydney’s</a> Baulkham Hills and Hawkesbury region (33.2 per cent).</p><h2><strong>Victoria</strong></h2><p>Victoria has seen the greatest divide in dwelling market performance between its regional and metropolitan areas. <a href="https://www.theurbandeveloper.com/articles/melbourne-housing-market-update">Greater Melbourne dwelling values</a> have increased 16.3 per cent in the 12 months to November (second-weakest result of the capital cities), while regional Victorian dwelling values are 24.0 per cent higher over the year.</p><p>Australia’s international migration restrictions and Melbourne’s extended lockdowns in both 2020 and 2021 were the two major headwinds to have impacted the city’s migration levels, economic output and housing demand across the city.</p><h2><strong>Queensland</strong></h2><p>The Queensland housing market has seen highly diverse property performance outcomes. Lifestyle markets in the state’s south-east have shown the highest rate of growth in the past year, while <a href="https://www.theurbandeveloper.com/articles/brisbane-housing-market-update">Brisbane</a> (and Adelaide) has a rolling quarterly growth rate that continues to trend higher.</p><p>This can be attributed to several factors including historically low listings and a median house value of $757,194, which is -23.3 per cent less than Melbourne’s median house value and -44.3 per cent less than Sydney’s median house value.</p><p>Queensland also recorded Australia’s highest net interstate migration figure in the year to March 2021, with interstate migration increasing 28.2 per cent over the year.</p><h2><strong>South Australia</strong></h2><p>As of November, the quarterly growth in dwelling values across Adelaide was 6.5 per cent, the second highest of the capital city dwelling markets and its highest quarterly growth rate for the past 20 years.</p><p>The Adelaide housing market has seen sustained, high levels of quarterly growth in part attributable to persistently low levels of housing supply and relative affordability. Adelaide’s median dwelling value of $558,179 makes it the third most affordable city behind Perth and Darwin.</p><h2><strong>Western Australia</strong></h2><p>WA’s dwelling values have been increasing since November 2019, placing them 22.1 per cent higher than when they bottomed out in October 2019, yet still -3.4 per cent below the record high of June 2014.</p><p>The recovery in WA dwelling values has been more robust across Perth, where values are -2.4 per cent below the June 2014 record, while dwelling values across regional WA remain -20.7 per cent below their peak of January 2008. The upward trend in property prices has followed several cash rate reductions, more positive trends in internal migration, and an uptick in employment, particularly across the mining sector.</p><h2><strong>Tasmania</strong></h2><p>Tasmanian dwellings continued to dominate growth performance across the states and territories through to November, with dwelling values rising almost 30 per cent in the past 12 months, taking the state’s five-year annualised growth rate to 11.8 per cent per annum.</p><p>Hobart’s median dwelling value has gone from the lowest of all capital cities at $359,088 to the fourth highest of the capital cities at $676,595 in the past five years. Over the same period median rent values have risen from $345 per week to $495 on the back of a robust economic and demographic position in the lead up to the pandemic.</p><h2><strong>Northern Territory</strong></h2><p>Low interest rates, first home buyer incentives, government assistance packages through Covid and improving economic conditions have supported dwelling values across the NT, which increased 15.6 per cent in the 12 months to November.</p><p>Strict border restrictions since the onset of Covid partially stemmed the flow of people away from the Territory and despite Darwin dwelling values rising 25.9 per cent since bottoming out in March 2020, the latest home value index results show Darwin’s dwelling values remain -15.3 per cent below the peak in May 2014.</p><h2><strong>Australian Capital Territory</strong></h2><p>The ACT’s housing market has surged consistently throughout 2021 with median house value across the nation’s capital $245 short of reaching $1 million in November, having increased 27.2 per cent in the past 12 months. The ACT overtook Melbourne’s median house value in October 2021 and is second only behind Sydney.</p><p>Despite the sustained growth, Canberra’s housing affordability has held up relatively well due to higher-than-average wages and low unemployment rates.</p></div></div></div></div></div>

The property market’s fastest upswing on record is providing significant support to the nation’s post-pandemic economic recovery…

Rising affordability constraints and a higher number of new listings are among factors taking pressure off market conditions as rising property values soften, says Corelogic

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Australian property values are seeing a slowdown in the monthly rate of growth. </p><p>This trend is expected to carry into 2022, as affordability constraints rise, mortgage rates bottom out, and a higher number of new listings takes some pressure off market conditions.</p><p>Since the monthly rate of growth in Australian dwellings peaked in March 2021 at 2.8 per cent (or the equivalent of about a $16,000 gain on the median Australian dwelling value), monthly increases have settled to 1.5 per cent (or a monthly increase of approximately $10,000).</p><p>The reduction in monthly increases is most prominent at the high end of the Australian dwelling market (or the 25 per cent of values, where dwellings values are around $1 million or more).S</p><p>Since peaking at 3.5 per cent in March, Australia’s high-end monthly changes in dwelling values has slowed to 1.5 per cent through October. The monthly growth across different value segments is shown in figure 2.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Monthly growth rate in housing values</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/9de55c10-8584-461c-adb3-34729a378f3b.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br><strong>Monthly growth rate: high, middle and low value tiers</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c1cc035b-2c10-4d70-b2a9-54185ddfb570.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The graph above shows the current upswing has seen greater volatility in the top 25 per cent of dwelling values, with relatively steady conditions across the low end of the market (the low end of the market is considered valuations at around $466,000 or less). </p><p>During the past 12 months, the highest value segment has seen the greatest level of gains (25.4 per cent), compared with 18.4 per cent across the middle of the market, and 16.7 per cent across the low end. </p><p>However, the volatility at the high end of the market, demonstrated by the rapid decline in growth rates, suggests the high end of the market can also expect a larger downturn in property values.</p><p>While growth rates are slowing at the national level, the October home value index results revealed some differences in momentum across the capital city markets. </p><p>Each capital city growth cycle is considered to the right and below, revealing that five of the eight capital city markets are seeing a slowdown in monthly growth rates. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Monthly growth rate in capital city dwelling values</strong></h2></div></div></div><div class="row ci"><div class="cell cell-sm-6 cx12"><div class="ci cl"><p><strong>Sydney</strong></p><p>In Sydney, dwelling values saw one of the fastest slowdowns in the monthly growth rate.</p><p>Following a peak monthly increase in dwelling values of 3.7 per cent in March 2021, growth has rapidly slowed to 1.5 per cent through the month of October.</p><p>This is in part due to the inherent volatility in more expensive markets like Sydney. </p><p>The slowdown in growth rates is likely being triggered by affordability constraints, and the higher levels of new listings being added to the market in recent weeks. </p><p><strong>Melbourne</strong></p><p>The Melbourne market has seen the third-fastest slowdown in monthly growth rates of the capital cities. </p><p>After a monthly peak of 2.4 per cent in March 2021, the increase in Melbourne dwelling values slowed to 1.0 per cent through October. </p><p>Melbourne has seen various headwinds to the dwelling market amid extended lockdowns and a drag on rental demand with the closure of international borders. </p><p>More recently, Melbourne saw the largest uplift in new listings volumes across the capital cities, with Corelogic counting 10,914 new listings added to the market for sale over the past four weeks (17 per cent above the five-year average). </p></div></div><div class="cell cell-sm-6 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/639d0d1d-d221-4a1d-8d71-2d703d9de4d7.jpg" width="492"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/6c1688bc-e3d2-4e94-b448-0ae431d429ec.jpg" width="494"/></picture><div></div></div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Despite the slowdown, a monthly growth rate of 1.0 per cent is still well above the decade average monthly movement of 0.4 per cent.</p><p><strong>Brisbane</strong></p><p>Monthly growth rates across Brisbane dwellings seem to be re-accelerating. </p><p>Property values increased 2.5 per cent in the month of October, the highest monthly increase across the city through the current upswing, and the highest monthly increase since November 2003. </p><p>The Brisbane housing market has seen some extraordinary tailwinds through Covid, including strong interstate migration, normalised remote work and low exposure to the virus itself. </p><p>Years of relatively subdued growth rates have made typical dwelling values across the city appear affordable ($642,097 in October), at least relative to Melbourne ($780,303) and Sydney ($1,071,709).  </p><p><strong>Adelaide</strong></p><p>Similar to Brisbane, the Adelaide housing market has seen its highest monthly increase since 2003, with capital gains of 2.0 per cent through October. </p><p>The momentum was led by a 2.2 per cent rise across houses, but even units saw an increase in monthly growth rates to 1.0 per cent through the month. </p><p>The Adelaide dwelling market has recently benefitted from a stronger interstate migration trend, relative affordability to other capital cities and a low level of available properties for sale, with total listings sitting -34.1 per cent below the five year average.  </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/71c91f8c-c656-42b3-9d82-35a6a20cef15.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Perth recorded the fastest slowdown in growth rates for property values, according to Corelogic.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br><strong>Perth</strong></p><p>The dwelling value change across Perth was -0.1 per cent over the month of October. </p><p>The virtually flat reading was down from a peak of 2.7 per cent through February 2021, making Perth the market with the fastest slowdown in growth rates. </p><p>This slowdown in momentum may be due to a few different factors, including extended state border closures, renewed affordability constraints for first home buyers and a recent uptick in new listings volumes. </p><p><strong>Hobart</strong></p><p>In Hobart, the monthly increase in dwelling values has slowed from 3.3 per cent in March 2021 to 2.0 per cent in October. </p><p>A 2.0 per cent growth rate is still very high, and is equivalent to a $13,274 increase to the median dwelling value over October. </p><p>Hobart’s persistently strong increases in value represent very strong demand, including from interstate buyers, against extremely tight levels of stock. </p><p>Corelogic counted just 660 properties for sale across Greater Hobart in the past four weeks. </p><p><strong>Darwin</strong></p><p>Due to the relatively small size of the market, monthly growth rates are volatile across Darwin dwellings. </p><p>Nonetheless, there does seem to be a trend of slowing increases. In the three months to October, monthly increases averaged 0.1 per cent, down from a peak monthly growth rate of 2.7 per cent over April. </p><p>Despite inching higher, Darwin dwelling values are still -15.0 per cent below the record high value reached in May 2014. </p><p><strong>Canberra</strong></p><p>Similarly to Hobart, the Canberra housing market has seen extraordinary levels of demand against low levels of available stock.</p><p>In what may be some reprieve for buyers, the monthly rate of increase has shown signs of slowing from the recent peak of 2.6 per cent in July 2021. </p><p>Since then, monthly increases in dwelling values across Canberra have slowed to 1.9 per cent.  </p><p>It is important to keep in mind that while the rate of property value growth is continuing to slow nationally each month, even these reduced rates of increase are relatively high. </p><p>In fact, the decade average monthly movement in Australian home values is 0.4 per cent, far lower than the current ‘slowing’ rates of increase. </p><p>Through 2022, monthly growth rates are expected to continue declining. </p><p>This is due to a combination of factors, including a tighter credit environment, more normalised listings levels, and affordability constraints putting downward pressure on demand. </p><p>While a strong inflation reading for the September quarter has increased expectations of a tighter monetary environment as soon as 2022, recent statements from the reserve bank suggest an earlier-than-expected hike could be in 2023. </p><p>This will also be important to follow, given a higher cash rate and mortgage rates would likely put downward pressure on prices.</p><p></p></div></div></div></div></div>

Rising affordability constraints and a higher number of new listings are among factors taking pressure off as rising property values soften...

More Sales Than Listings in Residential Market

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Dwelling sales continue to surge across Australia against low listings levels. In the three months to July, Corelogic estimates there were around 171,100 sales. </p><p>This was 53.4 per cent higher than what has typically been seen this time of year for the previous five years.In the same period, there were just 121,200 newly advertised properties for sale in the three months to July.</p><p>This has taken the sales to new listings ratio to recent highs nationally, at 1.4 over the three months to July. </p><p>The <a href="https://www.corelogic.com.au/news/more-vendors-tried-sell-their-property-spring-did-people-buy-them-9">sales to new listings ratio</a> is calculated by dividing the number of sales that have taken place over a given period by the number of new listings added to the market over the same time. </p><p>For the past decade, the ratio has averaged 0.9, suggesting for each listing added to market there was just under one transaction that took place.</p><p>When the ratio is 1, it implies buyer demand and advertised supply is balanced.  </p><p>A sales to new listings ratio of 1.4 suggests strong selling conditions, as there is more than one transaction taking place for every new unit of supply in the same period. </p><p>The sales to new listings ratio has averaged above 1 since June, 2020.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Dwelling sales to new listings ratio, national</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ad65e2d6-f17f-4c86-b0c3-3e0f144bd6dc.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic, rolling 3-month average excluding December due to excess volatility </sub></sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Each of the capital city markets currently has a sales to new listings ratio of greater than 1, ranging from 2 in Adelaide, to 1.1 in Darwin. </p><p>Capital cities with imposed lockdown restrictions through July saw a particularly strong uplift in the ratio, which may be a result of a disproportionate number of vendors postponing the start of a selling campaign amid lockdowns.</p><p>Multiple factors can explain the surge in sales relative to low listings levels from mid-2020. </p><p>On the demand side, these factors include:</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Low mortgage rates </strong></h2><p>Increased buyer demand has stemmed from continuously falling mortgage rates. </p><p>Despite concerns of an earlier-than-foreshadowed lift in mortgage rates, RBA data shows average new home loan rates for owner-occupiers fell 12 basis points through the first half of 2021 and 18 basis points for investors. </p><p>Mortgage rates are one of the most important determinants of housing demand and in the current climate, where GDP is once again<a href="https://www.rba.gov.au/media-releases/2021/mr-21-14.html"> expected to decline</a>, the RBA will likely facilitate a low rate environment for longer.</p><h2><strong>A savings windfall</strong></h2><p>As social consumption declined through lockdowns, and household financial support was increased, household savings peaked at 22 per cent of household income in the June quarter of 2020, which was above the-then decade average of 7 per cent.</p><p> Combined with a range of incentives for home purchases introduced through 2020, increased savings levels may have bolstered borrower deposit levels, triggering additional sales since the onset of Covid-19. </p><p>Savings rates remained elevated at 11.6 per cent through the March quarter of 2021, which have supported sales volumes through the first half of this year.</p><h2><strong>Incentives for first home buyers </strong></h2><p>Last year saw the introduction of multiple first home buyer incentives, from the first home loan deposit scheme before the pandemic, to various state-based grants and concessions, along with incentives for the purchase or construction of new or off the plan property.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Dwelling sales to new listings ratio, capital cities</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c12ede00-cd60-45d7-bbfd-f17f0356387d.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: CoreLogic data is rolling 3-month average, excluding December due to excessive volatility</sub></sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>First home buyer purchases would go a long way in explaining the current supply and demand dynamic. </p><p>This is because owner-occupier purchasers who already own property would presumably list their existing home around the time they are purchasing a new one. </p><p>First home buyer activity, on the other hand, creates additional housing demand without adding new advertised stock to the market.  </p><p>The chart below shows the volume of secured home loans for first home buyers, which shows an extreme uplift in first home buyer activity. </p><p>First home buyer loans recently peaked at 16,260 in January 2021, which is almost double the series average of monthly first home buyer loans secured (8731).</p><p>Though first home buyer loan commitments have since trended lower, they remained 58.8 per cent above the series average through June. </p><p>In the same way that first home buyer purchases increase demand without adding to supply, investor purchasing activity has also trended higher since mid-2020. </p><p>Unlike first home buyer activity, investor purchases are not slowing down. </p><p>Through June, there were 18,625 secured home loans for investor property purchases, which is a 74.8 per cent increase on commitments in the same month of 2020.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Number of FHB owner occupier loans secured monthly</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/9fa6bd0d-d463-4afb-8c0a-fdd04094ba74.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: ABS</sub></sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>On the supply side, new listings stock was persistently low through 2020, as a lack of mobility and extended lockdowns across Victoria saw fewer Australians list their home for sale. </p><p>Through 2021, new stock added to the market has actually hit levels that are on par with previous years. </p><p>In the four weeks ending July 4, Corelogic counted around 38,000 new listings added to the market nationally, which is actually higher than the five year average level. </p><p>However, recent lockdown conditions have seen new listing counts slip back below the historic average, with Sydney in particular recording a -17.3 per cent drop in new advertised stock during the past four weeks.</p><p>Part of the reason listings have remained low through lockdown conditions is the assistance offered to home owners seeing hardship through Covid-19. </p><p>Mortgage repayment deferrals and household income support have kept distressed sales from hitting the market, and have more broadly been a factor in keeping housing market conditions stable. </p><p>However, it has also contributed to a persistent seller’s market, which is reflected in the high sales to new listings ratio. </p><p>The ratio may ease in the coming months as advertised supply moves through the normal seasonal spring uplift and buyer demand is limited by extended lockdowns, and affordability constraints.</p></div></div></div></div></div>

  Dwelling sales continue to surge across Australia against low listings levels...

Since the onset of Covid-19, a prominent trend across the Australian dwelling market has been high demand for detached houses.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Since the onset of Covid-19, a prominent trend across the Australian dwelling market has been high demand for detached houses. </p><p>This is reflected in price changes of houses and units since March last year, as stage two restrictions rolled out across the nation. </p><p>In the past 16 months, capital city house values rose 14.2 per cent. This is more than double the 5.6 per cent rise in capital city unit values for the same period.</p><p> As of June 2021, the median capital city house value was $797,287, compared to a median unit value of $611,117. </p><p>This marks a 30.5 per cent gap between median house and unit prices, which is the highest on record.</p><p>The charts below compare median house and unit values across the capital cities, alongside the house and unit value gap for the past 15 years.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/932b2740-6597-4fc7-b54e-87dd23d111c4.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic</sub></sup></p><p>It is worth noting that these charts track the median value over time only. Growth in these median values should not be equated to value changes in the entire dwelling market. Changes in values across the whole house and unit market refer to changes in the CoreLogic Home Value Index.</p><p>June 2021 marks the biggest gap between median house and unit values across Sydney, Melbourne, Brisbane, Adelaide, and Canberra during the past 15 years. </p><p>The Perth price gap between houses and units has just come off record highs, from 39.1 per cent over May, to 38.9 per cent over June. </p><p>Meanwhile, the price gap between median house and unit values has been trending down across Hobart and Darwin. The dynamics of each capital city are unpacked further below.</p><h2><strong>Sydney</strong></h2><p>Sydney houses and units currently have a record high price gap of 54.2 per cent. The difference in median house and unit values has skyrocketed since September 2020, as the house market saw a recovery trend following eased social distancing restrictions across the city. </p><p>Unit values continued to decline through to January 2021, as low levels of investor participation, and subdued rental conditions saw less interest in unit stock. As the Sydney lockdown reinforces the lasting impacts of Covid-19 on large cities, and monetary policy remains accommodative, Sydneysiders who can afford it may still be willing to fork out a premium for detached housing in the months ahead.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/e1a836d2-7b2c-4d7d-96da-b4d7b16e8da3.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><sup><sub>^Source: Corelogic</sub></sup></h2><h2><strong>Melbourne</strong></h2><p>Melbourne has seen a record high in the difference between house and unit medians at 52.4 per cent as of June. </p><p>Melbourne has also seen the weakest rental market performance since the onset of Covid-19, and as a large portion of rental stock are units, this has dampened demand across the segment. </p><p>This also likely explains some of the weakness in the Sydney unit market, where rental demand was similarly affected by a lack of overseas migration. Unlike Sydney however, Melbourne has seen similar rates of disparity through the 2017 and 2018 calendar years, when the house price premium on units averaged 46.3 per cent. </p><p>A prolonged period of high unit supply, and development of high density stock, kept unit values relatively low through this period. This dynamic may shift through the remainder of 2021, as ABS data points to a fall in construction of units, and a rise in the construction of new houses.</p><p>Furthermore, affordability constraints across the house segment, which could be amplified by the end of HomeBuilder and temporary stamp duty discounts, may guide more first home buyers back to the unit segment of Melbourne.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/43731266-9b29-4808-89db-2a55fa5631f7.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic</sub></sup></p><h2><strong>Brisbane</strong></h2><p>Brisbane has seen a distinct outperformance of house values relative to units. </p><p>Since the onset of Covid-19, house values across Brisbane have increased 15.5 per cent, compared to just 5 per cent across units. </p><p>But the gap between house and unit values has risen fairly consistently since mid-2015, and five-year annualised growth rates sit at 4.3 per cent for houses, compared with a -0.1 per cent decline in units. </p><p>Unit construction across Brisbane rose substantially through to late 2016, creating an overhang of stock when investor activity began to decline off the back of changes to macro prudential policy in late 2017.</p><p>The house price premium across Brisbane shows little sign of slowing down, as monthly growth rates over June continued to show a bigger uplift in houses (2.2 per cent) compared to units (0.7 per cent). </p><p>This could also reflect interstate demand for relatively affordable Brisbane houses, as the normalisation of remote work through Covid has promoted more movement from Melbourne to Queensland over 2020.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/224efd70-077e-44c6-ac60-e1d05ca63107.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic</sub></sup></p><h2><strong>Adelaide</strong></h2><p>Adelaide has seen an acceleration in the price gap between houses and units since February 2021, as the Covid-recovery in dwelling values was led by houses. </p><p>Since the onset of Covid-19, house values across Adelaide have increased 16.2 per cent, compared with a 7.3 per cent rise in units. </p><p>Despite the recent uplift in the price gap, Adelaide has long seen a premium on houses relative to units, with an average differential in the median of 34.7 per cent for the past 15 years. This may be due to the higher rates of owner occupation in the city contributing to more demand for detached housing, and elevated levels of unit construction from June 2017.  </p><h2><strong>Perth</strong></h2><p>Perth currently has the second-lowest house premium of the capital city markets at 38.9 per cent (behind Hobart at 32.3 per cent). </p><p>This follows a 15-year average house premium of 25.6 per cent, which is the lowest of the capital cities. Part of this is due to the relatively high stock of low-density housing across Perth, while units tend to be centred in more desirable or inner city locations, which would see relatively high median unit values. </p><p>However, like other large capital cities, the difference in house and unit values has surged since the onset of Covid. </p><p>The differential in prices for houses and units came off a record high through June, as monthly growth in house values softened to 0.1 per cent across the city compared with a 0.6 per cent lift in unit stock. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/f5708e71-d25f-4173-82ac-90194652eb3f.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Perth currently has the second-lowest house premium of the capital city markets at 38.9 per cent.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><br><strong>Hobart</strong></h2><p>Hobart is unlike most capital cities, in that the gap between house and unit values has been trending down, following a recent high of 35.9 per cent in February 2021. </p><p>Units have also seen a comparable increase in value (18.7pc) to houses (21.1pc) since the onset of COVID-19. </p><p>Hobart currently has the lowest gap between the median house and unit value at 32.3 per cent, though this is above the 15 year average of 27.6 per cent. </p><p>It is likely that a lack of available stock, and extreme affordability constraints, have pushed more demand into the unit segment in recent months. This has seen a quarterly increase in Hobart unit values of 10.3 per cent, compared to 6.7 per cent across the house segment. </p><p>Investor demand has also seen a strong resurgence across Tasmania, which may have contributed to the increased demand and price across the Hobart unit segment. </p><p>ABS housing finance data points to investor lending accounting for 28.4 per cent of housing finance for purchases through May 2021, which is the highest level since November 2017. Investor interest in the Hobart market has no doubt been affected by a flourish of domestic tourism presenting upside for the Tasmanian economy, and below-average levels of unit construction keeping supply relatively tight.</p><h2><strong>Darwin</strong></h2><p>Darwin, like Hobart, has also seen a decline in the gap between median house and unit values, following a recent high in September 2020. </p><p>House and unit values across the region have seen a similar uplift in value since the onset of COVID-19, at 24.3 per cent and 22.5 per cent respectively. Unlike Hobart, Darwin has sustained a relatively large house price premium, with the median sitting 68.5 per cent higher than units. </p><p>Darwin has the second largest gap between house and unit values of the capital cities, which surged from late 2017 amid a broader decline in investor activity.  </p><h2><strong>Canberra</strong> </h2><p>Canberra currently has the biggest house and unit price gap of the capital city markets, at 74.8 per cent. </p><p>Since the onset of the pandemic, the Canberra Home Value Index increased 22.7 per cent across houses, compared with 8.7 per cent across units. </p><p>However, the gap in Canberra house and unit values does not stem from recent demand trends alone; Canberra has seen a very large volume of unit developments during the past decade relative to houses. </p><p>For the 10 years to March 2021, there was an average 4593 units under construction each quarter compared to just 841 houses. </p><p>This equates to roughly 5.5 units supplied to the market for each house construction, relative to the national average of 2 units for each house over the decade. </p><p>This strong uplift in unit supply has left unit price growth relatively subdued.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/bb54a17c-4e0a-446b-aff6-19a80bc69f2c.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Canberra currently has the biggest house and unit price gap of the capital city markets, at 74.8 per cent.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>In previous CoreLogic research, several factors have been identified as to why the Covid period has seen more demand for houses than units, which has contributed to greater preference for lower density housing options. </p><p>These included subdued property investment levels through 2020 (where investors tend to be more strongly associated with unit purchases), the initial design of HomeBuilder being better suited to house developments, and the general appeal of lower density housing through a viral pandemic. </p><p>However, as gradually higher levels of vaccination pave the way for safer high density living, and affordability constraints are reached in detached housing, there may be more demand for unit stock in the years ahead, which would narrow the value gap between the two stock types. </p></div></div></div></div></div>

Since the onset of Covid-19, a prominent trend across the Australian dwelling market has been high demand for detached houses...

Corelogic Best Suburbs for Buyers

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>One of the factors cementing the current “sellers’ market” conditions in Australian housing is a low level of available stock for sale. </p><p>Recent strong price increases have in part been driven by demand for housing outstripping supply.</p><p>Corelogic estimates that in the three months to May, around 164,000 dwelling transactions took place in Australia. </p><p>Meanwhile, just 136,000 new properties were added to the market for sale in the same period. </p><p>While this new listings figure is higher than the previous five-year average (which is closer to 126,000), the uplift in sales volumes means that this stock is quickly absorbed</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>New listings added for sale, vs sales volumes</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/fa0b0ee6-8d92-439d-b839-7e9796e41c57.png" width="838"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic, three months to May - Australia Wide</sub></sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>So where do buyers find reprieve?</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Corelogic has analysed suburb-level listings data to understand where there may be more stock available than in previous years, and dwelling value increases have not surged as much as in surrounding suburbs.</p><p>The analysis was done using the total level of stock on market as counted in May, between 2016 and 2021 across Australian suburbs. </p><p>Corelogic highlights top suburbs within each state where stock on market has increased relative to the five-year average for May, and annual suburb dwelling value increases are less than the wider SA4 region over the past 12 months. </p><p>The results are presented in the table below.</p><p>The table features 33 suburbs across Australia. While each of these suburbs has seen ‘weaker’ dwelling value increases in the past 12 months relative the broader SA4 regions, only five of these suburbs have actually seen a decline in dwelling values year-on- year.</p><p>Many of the suburbs featured are characterised by inner-city or high density urban locations, where housing demand has been softer through Covid-19.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/598c099d-e443-46c2-b69a-88e0e8f68b46.png" width="871"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic</sub></sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>This may in part be due to a preference for detached housing stock. CoreLogic data suggests that in the year to May, national house values have increased 12.4 per cent compared to a softer 4.8 per cent rise in unit values. </p><p>This trend has emerged as investor demand remained relatively subdued in the past 12 months, and owner occupier preferences may have been influenced by spending more time at home through periods of strict social distancing.</p><p>Another factor leading to more subdued growth and elevated stock in these markets could be closed international borders. </p><p>Decline in demand for inner-city and high urban density housing has occurred across suburbs usually popular with overseas migrants and international students like Melbourne, South Yarra, Westmead and Randwick.</p><p>In addition to this, supply in many of the suburbs featured is being supported by new developments, such as in Hawthorn, Phillip and Macquarie Park.</p><p>Other suburbs featured include more remote, regional markets such as South Townsville, Mulambin and Nickol. </p><p>While buyers would find it easier to secure detached dwellings across these markets, they are quite remote, and may only appeal to buyers with more niche preferences.</p><p>CoreLogic analysed around 6000 suburbs, and found that only 938 had total listing volumes that were higher than the five-year average in May. </p><p>Of these, only 310 saw dwelling value increases that were slower than the broader SA4 market. </p><p>This second data point around growth rates are important when considering buying conditions, because high listings volumes can indicate a short term uplift in supply off the back of strong price increases.</p><p>Overall, the data highlights a fairly intuitive sense of Australia’s housing market. </p><p>There are slim pickings when it comes to favourable buying conditions. </p><p>Buyers willing to purchase more remote regional housing, or in higher density metropolitan areas, will have greater choice of stock.</p></div></div></div></div></div>

    Recent strong price increases have in part been driven by demand for housing outstripping supply...

Which dwelling markets have seen the biggest listings uplift?

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The volume of new homes advertised for sale is finally starting to lift relative to previous years. </p><p>In the four weeks to April 25 there were 27,055 new listings advertised in Australian capital cities. </p><p>A “new listing” is when a dwelling is first advertised within the period of measurement (unless it has already previously been advertised within the previous 75 days—then it is counted as a re-listing). </p><p>The chart below summarises the number of new listings in the combined capital cities. </p><p>It shows the count of residential properties newly advertised for sale over a rolling four-week period.</p><p>The latest count for 2021 is 17 per cent higher relative to the five-year average volume usually added at this time of year. </p><p>The chart also shows the new listings count has been rising consecutively for the past few weeks, at a time when listings would otherwise be typically moving through a seasonal slowdown. </p><p><strong>Rolling count of new listings added to market—2021 versus five-year-average </strong></p><p><strong></strong></p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/5cbbae6a-358d-4a00-aec8-095fc0ca8816.png" width="500px"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p>The increase in new listing volumes is likely due to vendors taking advantage of strong selling conditions and higher prices. </p><p>The increase could gradually ease the sense of urgency currently felt by hopeful home buyers in many parts of the country. </p><p>Sub head The increase in supply varies by region and stock type </p><p>There is variation in the uplift in new listings between houses and units. New houses added to market in the four weeks to April 25 totalled 17,792, which is 0.7 per cent above the previous five-year average. </p><p>Units added to the market totalled 9263. This is lower that the house figure but is almost 20 per cent above the average for the previous five years. </p><p></p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/b5cc211c-b528-4c8f-8ac8-a31c09830ab7.png" width="500px"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>But which regions most account for the uplift in new listings? The table below shows the top and bottom 10 regions in Australian capital cities, ranked by how new listings volumes in the past four weeks compared to the previous five-year average for this time of year. SA3 boundaries are used for the analysis as defined by the ABS. </p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/a4041887-3cef-4b28-96aa-3461bf945a44.png" width="500px"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The biggest uplifts in properties for sale relative to the previous five-year average has been dominated by Sydney and Melbourne. </p><p>Looking at the uplift in new listings compared to the 12-month change in dwelling values across each SA3 market, it seems that an uplift in new listings volumes are, albeit weakly, correlated with a decline in values. </p><p>However, the highest volume of new stock added to the market was seen across Mandurah in Perth, which has seen some of the strongest dwelling value growth in the past 12 months. </p><p>The Mandurah market has likely seen a strong uplift in listings because buyer activity has been extremely strong across the region. </p><p>Total stock in Mandurah is still more than 900 listings lower than the five-year average, and values across Mandurah are 8.7% higher over the year.  It is worth noting however that Mandurah dwellings are still—19.5 per cent below their record high in 2010.</p><p>Despite the recent uplift in properties advertised for sale, Mandurah is still a sellers’ market, with a rise in fresh listing numbers coming off a low base. </p><p>While additional supply is good news for some buyers, parts of smaller capital cities like Adelaide, Brisbane and Hobart show a different dynamic.</p><p> The number of new listings across the whole of Hobart in the past 28 days was just 243 dwellings, which is similar to the volume brought to market amid strict social distancing restrictions around the same time last year. </p><p>Such tight advertised supply could create an increased sense of urgency among buyers, leading to further upwards pressure on prices an d greater affordability pressures across these cities. </p><p>While a fall in listings can also be a vendor reaction to a lack of buyer activity, most regions still show evidence of high demand. </p><p>Furthermore, total listings numbers generally remain very low. Total listings are the count of all new and re-listed properties available for sale. </p><p>At the combined capital cities level, total listings are trending -17.1 per cent below the five-year average, even as new stock has been rising. </p><p>This is due to rapid absorption from high sales volumes. Total listings volumes could start to rise in the coming months, particularly if come buyers are deterred by a lack of affordability during the coming year. </p></div></div></div></div></div>

The volume of new homes advertised for sale is finally starting to lift relative to previous years...

Low mortgage rates, a swift economic recovery—which has spurred consumer sentiment—and low listing volumes have catapulted national housing values to record highs.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Low mortgage rates, a swift economic recovery—which has spurred consumer sentiment—and low listing volumes have catapulted national housing values to record highs.</p><p>At the end of March, the Corelogic national home value index increased a further 2.8 per cent, placing values 5.6 per cent above the previous market peak in October, 2017.</p><p>The combined value of Australian dwellings hit $7.9 trillion during the month, according to Corelogic. </p><p>This cements residential property as an extremely large and important asset class.  </p><p>Comparing current capital city values with previous peaks adds some perspective to the current upswing, particularly in Perth and Darwin, where values remain substantially below their record highs from 2014. </p><p>It also highlights the different dynamics across capital cities, such as in the ACT, where dwelling values have hit a new high every month for 19 months. </p><p><strong>Sydney</strong> </p><p>Sydney house and unit values took 44 months to reach a new high value. </p><p>While values have lifted a relatively high 8.1 per cent since the Covid-induced decline (which bottomed out in September, 2020), the total value of the dwelling market is actually only 2.6 per cent higher than the previous peak, which was in July, 2017.  </p><p>In 2017, a property price downturn was likely catalysed by changes to lending conditions.</p><p>Cash rate reductions, along with a relaxation in borrower serviceability assessment rules, spurred the start of a recovery trend through 2019. </p><p>Covid-19 interrupted this upswing, but a recovery in economic conditions, and increased consumer confidence, has pushed values above the previous peak.  </p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/49be387c-a2f7-4694-8480-73e89662ca40.jpg" width="920"/></picture><div><span style="align-content:center;opacity:0.8">The Melbourne housing market was the most affected of any capital city by Covid-19.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p><strong>Melbourne</strong> </p><p>Melbourne values reached a peak in March, 2020 after staging a recovery from the earlier 11.1 per cent drop in values between late 2017 and mid-2019. </p><p>The Melbourne housing market was the most affected of any capital city by Covid-19, due to extended social distancing restrictions through 2020 and a high exposure to overseas migration as a source of housing demand. </p><p>Closed borders created a negative shock, with a more significant and direct impact on inner city rental demand. </p><p>Since bottoming out in October, 2020, as stage 4 lockdowns began to ease, Melbourne dwelling values have climbed 0.7 per cent above the pre-Covid high.  </p><p>As the value of Melbourne housing nudges above its previous peak, it is worth noting the market has not recovered evenly.  </p><p>House values remain -1.8 per cent below the previous November, 2017 high due to a larger correction through the recent downturns. Within different price segments, there is also variation.  </p><p>As of March, the “high” end of the market (measured as the top 25 per cent of values in Melbourne) was still -4.0 per cent below its record high, which was in October, 2017.</p><p>Meanwhile, low- and middle-tier values have increased beyond their pre-Covid highs by 4.9 per cent and 2.2 per cent respectively, reflecting a smaller decline turn recent downturns, as well as strong demand from first home buyers who typically target properties around the middle-to-lower end of the market.  </p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/16081cf4-2923-4650-ad9d-3709529f89c6.jpg" width="920"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p><strong>Brisbane </strong></p><p>Brisbane house and unit values are 6.5 per cent above the previous peak, which was in April, 2020. </p><p>Market values saw a peak-to-trough decline of -0.9 per cent through Covid-19. </p><p>The decline lasted just four months when Brisbane dwelling values recovered to a new high by October, 2020. </p><p>As with Melbourne, the recovery in the Brisbane market has been varied. </p><p>While house values climbed 7.6 per cent above the previous peak through March, which was reached in May, 2020, unit values remain -9.4 per cent below the record high value, which was in March, 2010. </p><p>Brisbane unit values are currently at similar levels to October, 2007, reflecting an affordable entry point to the market. </p><p>The weaker conditions across the unit sector are likely due to previously high levels of unit completions keeping values subdued, particularly in the later part of the 2010s. </p><p>ABS dwelling completion data saw unit completions across Queensland rise 50.4 per cent in the five years to September, 2020, compared to a 17.4 per cent lift in house completions. However, strong internal migration flows to south-east Queensland, as well as other tailwinds for housing demand more broadly, has supported five consecutive months of growth in Brisbane unit values since November, 2020. </p><p><strong>Adelaide</strong> </p><p>The Adelaide market was one of the least affected through Covid-19 in terms of values.</p><p>Following a -0.2 per cent dip from the previous high in May, 2020, values had surpassed the previous peak by September last year. </p><p>The rate of change in dwelling values jumped to a monthly increase of 1.5 per cent during March, 2021, which is the highest monthly growth rate seen  across the city since December, 2007. </p><p>House and unit values in Adelaide are currently sitting at a record high.  </p><p>Although housing values are reaching new highs each month, relative to the larger capital cities, Adelaide housing values remain low.  </p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/0dd6b3df-7e71-455a-8488-bbee73f4f1dd.jpg" width="920"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p><strong>Perth</strong> </p><p>The Corelogic home value index for Perth shows values -15.9 per cent below the record high, which was in June, 2014. </p><p>The peak-to-trough decline, which was induced by the rapid withdrawal of  mining investment, employment opportunity and migration, created an additional negative shock, which pushed values down a further -2.2 per cent between April and July, 2020.</p><p>However, the Perth dwelling market has seen consecutive increases in value for the past eight months. </p><p>For the past five months, value increases have exceeded 1 per cent a month, which is a strong growth rate and signals the start of what may be a sustained and rapid recovery. This co-incides with rising interstate migration levels to Western Australia and projected increases in  already rising mining investment.  </p><p><strong>Hobart</strong> </p><p>Hobart has seen the second-highest lift in housing values from the previous peak, at 12.3 per cent.</p><p>That previous peak was in February, 2020, before a brief Covid-induced decline in total dwelling values of just -0.3 per cent. </p><p>Hobart values have seen extraordinarily strong growth with the annualised capital growth return sitting at 9.4 per cent for a five-year period (+56.3% during the past five years).</p><p>ABS building activity data suggests house commencements were 32.8 per cent above the decade average through the September, 2020  quarter in Tasmania. </p><p>Combined with affordability constraints, additional stock should work to ease growth rates across the region in the coming months.  </p><p></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/39c1b49d-aa3a-4ff5-b334-35fc8f448028.jpg" width="920"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p><strong>Darwin</strong> </p><p>Darwin values are the furthest from the previous peak of the capital city markets. </p><p>A record high was reached across Darwin houses and units in May, 2014.  </p><p>Similar to Perth, a decline in the resources-related infrastructure sector saw a substantial decline in  housing values, with the peak-to-trough fall extending to February 2020, at -32.7 per cent.</p><p>Since February, 2020  however, Darwin values have increased 16.5 per cent through to March, 2021, which is the fastest growth rate among the capitals. </p><p>This leaves values -21.6 per cent below the record high, and shows the Darwin dwelling market firmly in a recovery trend.  </p><p><strong>ACT</strong> </p><p>ACT values at the end of March were 16.9 per cent higher than the previous peak, which was in April 2019.  </p><p>Following a -1.5% peak-to-trough decline, ACT dwelling values had recovered by September, 2019, and have hit a new record each month since. </p><p>Rapid dwelling value growth across the capital has largely been driven by house values, which are 19.7 per cent above the previous high in April, 2019, compared to a 7.2 per cent lift in unit values since the previous high. </p><p>Part of the strength in ACT value returns has been due to relatively high incomes across the territory, as well as resilient labour market performance through Covid-19.  </p><p>However, the fact that values have surged  almost 17 per cent in less than two years highlights an increasing barrier to ownership for future first home buyers.  </p></div></div></div></div></div>

National housing values have surged to record highs—but how do they compare to the previous best levels?