Source: Nopparat Khokthong,Shutterstock
- Australian housing market saw a monthly uptick of 2.1% in its prices, the highest rate in about 13 years.
- Regional areas saw a lesser dip than main cities as conditions improved swiftly across them.
- Improved employment level coupled with the extension of the HomeBuilder grant, as well as record-low interest rates, led to the housing sector boom.
The Australian housing market hit the headlines Wednesday as it saw the highest monthly price surge since 2003. House prices went up 2.1% in February after hitting an all-time low level last year due to the coronavirus pandemic-induced restrictions.
The housing price boom started in December last year when restrictions in place started to ease. Eager homebuyers could examine the property rates before purchasing it as the lockdown and restrictions were removed. This record high surge was observed under the improving economic conditions across Australia as well as due to favourable first-homebuyer policies.
RELATED READ: What factors drove demand for housing loans in December?
CoreLogic estimates suggest that capital cities saw a surge of 2% in housing prices, led by Sydney and Melbourne. Both cities were adversely impacted due to a lack of immigration during the last year, but the prices have risen substantially over the month of February. Additionally, the price surge in regional areas did not lag either as prices went up 2.1% over the month.
Prices in regional areas saw less price dip last year, as many people shifted away from cities under remote working facilities. Hobart also saw a significant price rise, followed by Canberra and Perth.
According to CoreLogic statistics for dwelling values, the median value for places like Melbourne and Canberra was well above AUD700K, while for Sydney, it almost touched AUD900K. The national median dwelling value was reported to be AUD598K by the real estate analytics firm.
Factors Pushing Demand
There were several factors that gave impetus to the rising demand for Australian property. The record low interest rates combined with an improving economic scenario made for the perfect recipe for the surging housing prices.
The interest rates are expected to remain at all-time low levels for three years, at least. This gave homebuyers confidence about future loan repayments. Additionally, the government’s HomeBuilder grant, which was extended till March 2021, helped ease the blow to the housing sector last year.
RELATED READ: Why RBA kept interest rate unchanged
To add to this, increased employment levels also enabled the larger population to avail housing loans and buy property. The increased response to the pandemic helped assist the recovery. Thus, the faster-than-expected recovery enabled the housing prices to increase swiftly at a rate not seen in 17 years.
A shortage of supply has led to this sudden boom, leaving buyers with lesser area to negotiate. However, it is unclear at this stage whether this housing price surge would be beneficial for cities like Sydney and Melbourne in the long run.