Demand boosts value growth

Home values continue to rise in most states due largely to low inventory levels, new research shows.

Cotality’s Home Value Index for February has revealed a clear divergence in housing trends, with Sydney and Melbourne values flatlining while the other capitals continued to record a solid rate of gain of more than 1 per cent each month.

Perth is showing the strongest trend, with home values jumping 2.3 per cent in February, adding more than $22,500 to the median dwelling value over the month. Brisbane, Adelaide and Hobart have also recorded a rise of more than 1 per cent in February. Sydney and Melbourne have been less resilient to the February rate hike and the drop in sentiment, with home values flat over the month and down 0.1 per cent and 0.4 per cent respectively over the last three months.

Cotality research director Tim Lawless observed that while Sydney and Melbourne have traditionally led Australia’s housing cycles, there have also been periods where the market has moved in a counter-cyclical way.

“The clear slowdown in housing conditions across Sydney and Melbourne could signal an easing in growth conditions elsewhere down the track, but for now, the mid-sized capitals continue to see support from extremely low inventory levels, which is boosting the growth in values”, Lawless said.

In the four weeks to February 22, Perth listings remained 48 per cent below their five year average, with Brisbane 31 per cent below and Adelaide 23 per cent lower. Advertised stock levels are also low in Sydney and Melbourne, but just 1 per cent and 4.3 per cent down on five-year average levels respectively.

Additionally, Sydney and Melbourne have seen a clear pickup in the flow of new listings through February, with freshly advertised stock 9.7 per cent above the five-year average in Sydney and almost 12 per cent higher than average in Melbourne.

“Vendors are looking more motivated in Sydney and Melbourne, possibly looking to beat a further softening in selling conditions as clearance rates ease and demand slows”, Lawless said, adding that if the typical seasonal pattern holds, the flow of new listings is likely to strengthen, leading into Easter.

Delving a bit deeper into the trends shows the more affordable end of the market is still delivering some strength. In Sydney, for example, lower quartile house values were up 0.8 per cent over the month, while upper quartile house values dropped 0.9 per cent. The same trend, to different extents, is evident across each of the capital cities.

“There is a lot of competition for lower-priced properties”, Lawless noted.

“First home buyers, investors and subsequent buyers are all competing across this sector of the market, while credit is less available across the higher price points due to serviceability constraints”, he concluded.

Regional markets are showing a similar trend, outperforming the capitals across New South Wales, Victoria, South Australia and Tasmania, with demand more resilient thanks to lower price points and evidence of rising internal migration rates.