Home values rise, but pace of growth slows

Australian housing values lifted by 1.8% in April according to CoreLogic’s national home value index, with the monthly pace of capital gains easing from a 32-year high in March (2.8%).  Although growth has slowed, home values are still on the rise, up 6.8% over the past three months to be 10.2% higher than the COVID low in September 2020.

CoreLogic’s head of research, Tim Lawless, reported the pace of capital gains could slow further over the coming months as stock levels increase and affordability constraints dampen housing demand. “The slowdown in housing value appreciation is unsurprising given the rapid rate of growth seen over the past six months, especially in the context of subdued wages growth. With housing prices rising faster than incomes, it’s likely price sensitive sectors of the market, such as first home buyers and lower income households, are finding it harder to save for a deposit and transactional costs.”

Even now there is evidence of less first home buyers in the market. The Australia Bureau of Statistics reported a -4% fall in first home buyer home loans through February, the first drop since May last year.

The continuing trend of houses outperforming units has remained through April as higher density styles of housing experienced less demand due to rising supply across some inner city areas. The combined capital city level house values (8.6%) have risen at double the pace of unit values (4.3%) over the first four months of this year.

As if rising prices didn’t make buying property difficult enough in the current market; a recent AFR report suggested residential property investors are roaring back into the market too, lured by the surging home prices and improving cash flow. Interest rates remain low, and lack of oversees travel means more money in the pocket for buyers to use on an investment property. Australian Bureau of Statistics data shows the value of national investor lending rose by 12.7 per cent over March to $7.8 billion – the highest monthly total recorded since the similarly strong market conditions of August 2017.