The Urban Developer
AdvertiseEventsWebinarsUrbanity
Industry Excellence
Urban Leader
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Urban Leader Awards Logos RGB White
NOMINATIONS CLOSING THIS WEEK RECOGNISING THE PEOPLE BEHIND THE PROJECTS
NOMINATIONS CLOSING THIS WEEK URBAN LEADER AWARDS
LEARN MOREDETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ADVERTISEMENT
SHARE
36
print
Print
OtherTed TabetWed 07 Apr 21

Stimulus, Interest Rates Sends House Prices into Overdrive

dfa2de81-f63b-4a9a-ba87-5bc087db0139

Australian housing prices have grown by more than 500 per cent during the past 25 years.

According to data from REIA, capital values have lifted from $160,000 in 1996 to $825,000 in 2020.

Housing prices spiked by 25 per cent in the past five years, from a median of $683,000 to $825,000, while other dwellings rose by 10 per cent to $600,000.

During the 25 years, Australian housing yields tightened from 5.1 per cent to 2.9 per cent while other dwellings recorded a drop in yields from 5.2 per cent to 3.7 per cent.

Houses in Darwin had the highest return, averaging 4.2 per cent, while Melbourne and Sydney had the lowest yields, both falling from around 4 per cent in 1996 to just 1.8 per cent in 2020.

House prices now look on track to surge again as buyers take advantage of record low-interest rates, low levels of immigration, government programs and utilise money saved during the coronavirus recession.

▲ Across the combined capital cities, 874 homes were taken to auction over the weekend making it the busiest Easter on record.


The signs already look good for a strong price rally in 2021 after the east coast-dominated residential market finished 2020 strongly, with more buyers entering the market as listings remained low.

Across the December quarter, the weighted average capital city median price increased by 6 per cent to $825,205 for houses and 0.9 per cent for other dwellings.

Owner-occupiers have driven the boom with new loans up 80 per cent since May, although investor activity is starting to grow with a 9.4 per cent increase in January, the strongest monthly result since September 2016.

“Despite rising vacancies and the low yields, we are starting to see investors re-emerge as they respond to a rising market with further growth expectations and low borrowing costs,” REIA president Adrian Kelly said.

ANZ economists expect Sydney and Perth house prices to jump 19 per cent across 2021, with prices in Hobart expected to lift by 18 per cent, Melbourne and Brisbane 16 per cent and Adelaide 13 per cent.

Westpac also upgraded its forecasts for the next two years, tipping 10 per cent gains this year and next year.

▲ Home values continue to rise on the back of ultra-low interest rates, stimulus and the nation's adept handling of pandemic. Image: Alamy


The RBA said it will keep the cash rate at 0.1 per cent until 2024, despite the bank’s own research finding a permanent cut to rates of one percentage point could push house prices up 30 per cent over three years.

The RBA has said it will only lift interest rates when inflation is sustainably within the 2-3 per cent band.

No action has been taken by regulators who say high lending standards continue to be maintained, however prices and loan activity will continue to be under scrutiny.

The last time house prices nationally lifted so much was in the late 1980s in a property boom that was ended by double-digit interest rates and the 1990-91 recession.

SQM Research managing director Louis Christopher said recent price increases had not been supported by the fundamental dynamics of supply and demand, but low interest rates.

AMP chief economist Shane Oliver said recent prices increases in the face of low immigration suggested that an impending oversupply could be on the horizon.

“Without immigrants coming in, the underlying demand will be running below supply which will lead to rebalancing,” Oliver said.

“[This] massive pandemic inspired demand for houses [has also been] helped along by HomeBuilder which ends this month,” Oliver said.

ResidentialAustraliaReal EstateSector
AUTHOR
Ted Tabet
The Urban Developer - Journalist
More articles by this author
website iconlinkedin icon
ADVERTISEMENT
TOP STORIES
Exclusive

Beyond the Aerotropolis: How Airports are Turning into Cities

Taryn Paris
6 Min
Exclusive

Inside the Strategy Behind Australia’s Largest Direct Real Estate Deal

Phil Bartsch
5 Min
Exclusive

Green Premium, Brown Discount: New ESG Regulations Drive Value

Patrick Lau
8 Min
Exclusive

Arup Targets Podium Finish for Brisbane CBD Headquarters

Taryn Paris
6 Min
Exclusive

No Cookie Cutters: Finding Feasibility in HAFF Projects

Patrick Lau
6 Min
View All >
Goodman Oakdale hero
Industrial

Goodman $130m Horsley Park Logistics Scheme Goes Public

Clare Burnett
Sponsored

Generational Housing Crisis Demands Generational Response

Partner Content
Residential

Urbex Lays Down $38m for SEQ Growth Corridor Site

Lindsay Saunders
The national property developer plans more than 200 lots on the 15ha block it has put its foot on near Logan...
LATEST
Goodman Oakdale hero
Industrial

Goodman $130m Horsley Park Logistics Scheme Goes Public

Clare Burnett
3 Min
Construction

Generational Housing Crisis Demands Generational Response

Partner Content
3 Min
Residential

Urbex Lays Down $38m for SEQ Growth Corridor Site

Lindsay Saunders
2 Min
Exclusive

Beyond the Aerotropolis: How Airports are Turning into Cities

Taryn Paris
6 Min
View All >
ADVERTISEMENT
Article originally posted at: https://www.theurbandeveloper.com/articles/house-prices-up-500-per-cent