Dwelling values reach a new high this year

  • By Zilla Efrat

The estimated value of Australia’s residential real estate jumped from $7.2 trillion at the end of November 2020 to a record high of $9.4 trillion in just 12 months, according to CoreLogic’s annual Best of the Best Report.

In addition, sales volumes have climbed to an estimated 614,635 over the past year, the highest level in almost 18 years. And, dwelling values nationally have increased 22.2 per cent in the 12 months to November, the highest increase since 1989.

“The strong housing market performance over the year was driven by multiple factors, including low-interest rates, fiscal and institutional support for households, high household savings and relatively low levels of advertised stock,” says CoreLogic’s head of research, Eliza Owen.

“Rates of housing turnover had also been relatively low for some years before these factors boosted housing demand, which may also explain the elevated volume of sales in the past 12 months, which at November was 32.6 per cent above the decade annual average.”

CoreLogic’s report notes that detached house values surged 24.6 per cent over the past year, outperforming the 14.2 per cent rise in national unit values. Similarly, the 25.2 per cent increase in regional dwelling values outpaced the performance of the combined capital cities (21.3 per cent).

Owen attributes the rise in regional housing values to various factors, including extended lockdowns through 2021 and remote work trends.

“The quiet coastal suburb of Yamba, in the Coffs Harbour-Grafton region of NSW, achieved the highest annual growth in units of suburbs across Australia, at 56.6 per cent,” she says.

“Regional suburbs were represented in many of the top value growth tables, including Ocean Grove units in Geelong (up 41.7 per cent in the year), Fraser Island units in Wide Bay (up 48.2 per cent), and Campbell Town houses in Tasmania (up 50.5 per cent).”

Higher-end lifestyle markets such as the Mornington Peninsula in Melbourne, the Northern Beaches in Sydney and the Gold and Sunshine coasts in South East Queensland, were also among the year’s top performers, as movements from cities to regions accelerated.

“This may in part be attributable to how COVID-19 continued to shape demand trends, with coastal or leafy settings being more desirable as some workers were empowered to work remotely,” says Owen.

“However, this phenomenon may also just reflect market dynamics that have been observed in the housing market cycle over about a decade, where more expensive markets (particularly in Sydney and Melbourne) tend to show more volatility. This means during the upswing phase of the housing market cycle, expensive property markets in these cities will generally see higher growth rates.”

The Best of the Best Report reveals that St Andrews Beach on the Mornington Peninsula recorded a value growth rate of 58.6 per cent, the highest for houses in the country. Meanwhile, Mosman, one of Sydney’s most affluent suburbs, recorded 325 transactions worth almost $1.8 billion in house transactions for the year.

The report shows that units dominated the top 10 list of Australia’s most expensive property sales in 2021, including three unit sales of more than $40 million each in the newly completed Barangaroo tower on Sydney’s harbourfront. The top 10 sales for the year totalled $407 million and ranged from $31,250,000 to $60 million.

That said, there has been a softening in growth trends with many of the driving forces behind the current upswing losing some of their impact in the second half of 2021.

A surge in vendor activity resulted in a significant pick up in new listings, adding almost 51,000 new property listings in the four weeks to 5 December 2021. New listing figures for the same period in the previous five years averaged 41,800.

The number of auctions scheduled across the combined capital cities also reached a new high in the week ending 28 November (4,251) only to have the record broken again two weeks later when almost 5,000 properties went under the hammer.

Owen believes it’s likely that Australia’s property market has seen the peak of price increases as worsening affordability constraints, a surge in vendor activity and a recent tightening of housing finance conditions take effect.

She notes that it’s also probable that sales and listings activity have peaked.

“The constraints of slightly tighter credit conditions, the erosion of housing affordability and a higher level of listings being added to the market are expected to see softer growth rates across property values in 2022,” she says.

“These forces are an accumulation of headwinds for property market performance. Softer growth rates are likely to coincide with fewer purchases, where sales and listings activity eventually move with momentum in price.