In the midst of a global pandemic and on the back of an economic recession, you’d expect Australia’s property to be in serious trouble, right?
Wrong! If you follow our regular monthly property updates where we track the latest real estate and economic data you will know that records are tumbling as the market continues to defy expectations, and gravity. With headlines like, Sydney and Melbourne house prices rise tens of thousands of dollars in one month, you would be forgiven for asking what the hell is going on?
A number of factors can explain the current surge in property values, specifically:
- Government stimulus measures propping up the economy and encouraging consumer spending
- Home buyer concessions putting money in people’s pockets
- Record lowest interest rates in history making borrowing cheap as chips
- Low listing numbers relative to demand meaning there aren’t enough properties to go around
- FOMO, buyers ‘fear of missing out’, is also helping to drive the surge in sales
The big picture is that national home values rose +2.8 per cent in March, the fastest rate of growth since October 1988.
Sydney and NSW are setting the pace this month, with the country’s largest property market the top performing capital city, while NSW regional markets also recorded stellar growth over March ‘21.
The upper quartile of the market is also leading the current acceleration, a trend that typically accompanies a ‘boom’ or sharp uptick in home values.
Let’s look at the data in more detail and identify which suburbs in NSW have outperformed the wider market over the past month.
Sydney market update - March 2021
Sydney is the top performing capital over March, with values up +3.7 per cent over the month, +6.7 per cent higher over the first quarter of 2021.
This means property values have risen +5.4 per cent for the year to date (YTD), for a median price of $928,028. According to CoreLogic this is the strongest performance over a quarter since June/July 2015.
Sydney is the top performing capital over March, with values up +6.7 per cent higher over the first quarter of 2021, the strongest performance since 2015
This surge brings Sydney dwelling values past their July 2017 peak, a recovery CoreLogic describes as, "remarkable...considering the -14.9% drop in values through to May 2019 and the further -2.9% fall throughout the COVID downturn".
The most expensive segment of the market is leading the acceleration in growth with Sydney's upper quartile home values up +4.8 per cent higher over the month, compared with a +2.2 per cent lift over the lower quarter.
During the downturn, it was premium value properties that were leading the declines in home values, but with buyers now taking advantage of improving economic conditions and record low interest rates, this trend has flipped with premium-end properties driving price gains.
The trend of detached housing outperforming units continues, with houses advancing a whopping +4.3 per cent over the month, vs +2.1 per cent for apartments. Sydney’s median house price is now $1,112,671, which is nearly $50,000 higher than February - which brings house prices up +8.2 per cent for the quarter.
Anecdotal evidence from agents on the ground confirm the current frenzy of buyer activity, with Real Estate Agent Ben Spackman (Raine and Horne Mona Vale) reporting that homes are spending just 17 to 28 days on the market, where previously they took 60 to 90 days to sell.
Regional NSW market update - March 2021
The sales activity in metro markets has seen growth eclipse values in regional markets for the first time in a year, though values were up a respectable +2.8 per cent over March. However over the medium term - in this case a year - CoreLogic reports that regional housing values are +11.4 per cent for the YTD, which puts capital city values (+4.8 per cent) in the shade.
CoreLogic reports that regional housing values are +2.8 per cent over March, and +11.4 per cent for the YTD
Real Estate Agent Scott Wilson (Richardson & Wrench) in Umina Beach on the NSW Central Coast says that the buoyant market is down to low stock levels, which is driving the sharp price rises.
For those thinking of putting their property on the market, Mr Wilson thinks these great selling conditions won’t last forever, pointing out that, "...now is the time to maximise where there’s limited stock on the market".
Sydney and NSW rental market update
Overall the rental market has stabilised in Sydney since the new year, with SQM Research reporting that residential vacancy rates have dropped slightly from a high of 4.0 per cent in May 2020 to 3.3 per cent in february 2021.
Overall capital house rents (+5.2 per cent) continue to outperform units, which are actually down -3.8 per cent since March ‘20. In Sydney asking rents for houses are now $656/week, which is slightly up on the recent low of $611 recorded in Oct ‘20. Unit rents in the city have stablised slightly to $453/week, from a recent low of $444 in January this year.
Metro rental markets like Sydney continue to be impacted by the absence of international students and the closure of international borders, two factors which are not close to being resolved.
Overall capital house rents (+5.2 per cent) continue to outperform units, which are actually down -3.8 per cent since March ‘20
What does this mean for the Sydney market and what can you expect in future?
What can we expect for the near term future of the Sydney market?
Here is where we take the counsel of property experts, who have their ear to the ground on all matters property - metaphorically speaking.
Property investor Michael Yardney believes, "...moving forward, extremely strong demand for houses in Sydney, particularly in the inner and middle ring suburbs, is likely to continue...while the demand for apartments is likely to remain softer".
CoreLogic’s Head of Research, Tim Lawless feels that currently, "Australians are feeling optimistic and confident in making high commitment decisions related to the property market’, though cautions that, ‘While we are expecting housing values to continue rising throughout 2021 and well into next year, it is reasonable to expect the pace of growth will slow", due to "...factors such as rising interest rates, weaker economic conditions or changes to credit availability".
NAB’s outlook is also a little more cautious: "New headwinds for the housing market could be seen in the form of tighter lending policies", and future performance will "...depend on the course of the virus amidst the vaccination program, as well as evolving economic and demographic trends".