Australia Real Estate Value Index
Updated: May 24, 2021
CoreLogic's March Home Value Index reveals that national home values increased at the fastest rate of appreciation since October 1988.
CoreLogic's National Home Value Index posted a 2.8% increase in March, the fastest rate of appreciation since October 1988 (3.2%). These exceptionally strong growth conditions remain broad-based, with values increasing by at least 1.4% in each of the capital cities and "rest of the state" areas during the month.
According to CoreLogic Research Director Tim Lawless, “The last time Sydney home values posted such a strong quarterly trend was in June / July 2015. After this brief increase, the pace of growth slowed rapidly. as caps on investor lending were activated to slow the market."
Too much demand for available supply
The strength of the housing market is supported by a disconnect between supply and demand.
On the supply side, total ads run remained extremely low throughout March. A tally of total national listing numbers for the four weeks ending March 28 shows that announced stock levels were -25.5% below the five-year average.
Estimated sales activity remained high until March. CoreLogic estimates that the number of home sales during the March quarter was 21.9% higher than a year ago. This was led by Perth, which posted an estimated increase in sales of 42.2%, or roughly 3,200 sales, compared to the same period in 2020.
Since home values are increasing faster than rents, gross rental yields have been trending downward. Most regions still show higher gross returns than typical mortgage rates, implying some opportunity for positive cash flow investments.
Increases in difficulty to buy
Short-term interest rates are unlikely to rise anytime soon, and the economic recovery has a long way to go. However, restrictions on housing affordability, particularly for those who do not own a property, are increasing.
The prospect of tighter credit policies is also on the radar, what we know from previous periods of credit squeeze will likely have an immediate dampening effect on real estate activity. The likelihood and timing of any change in credit policies is highly uncertain and is highly dependent on a substantial increase in credit metrics, such as debt-to-income ratios, loan-to-income ratios, or high LVR loans.
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