Home prices growing at fastest pace in over 32 years: CoreLogic

A shortage of homes is fuelling the fastest pace of property price growth since 1988, but CoreLogic says the surge is unlikely to last.

Auctioneer Bruce Wilson in action in Brisbane. Pic Annette Dew

A pre-Easter surge in new home listings has paved the way for the fastest property price growth in the residential market in over 32 years.

CoreLogic’s monthly property price index has revealed a 2.8 per cent national uplift over the month of March. It was the fastest rate of growth since October 1988, when prices rose 3.2 per cent.

The March rise has all but erased COVID-19 impacts on the property market. All capital cities are now back to pre-pandemic highs and are now outpacing the regions, while Sydney and Melbourne are now once again rising ahead of the smaller markets.

Only inner-city apartments continue to lag, but positive signs suggest a stabilisation in rent and selling prices.

CoreLogic’s executive of research Tim Lawless said the housing market’s strength is being supported by a disconnect between demand and supply. For every property listed, 1.1 are selling, which is creating a strong fear of missing out among buyers.

“A lot of people point to interest rates which are definitely part of (why prices are rising), but really at its heart, this is a story about supply and demand which are completely disconnected,” Mr Lawless said.

“It really reflects an absolute surge in transactional activity and active buyers. There’s not a lot of stock around for people to purchase, and there’s a lot of people looking to buy. The urgency that that situation is creating has put a lot of upward pressure on prices”.

An above-average number of homeowners listed their properties on the market last month but the total number of available homes slipped to extremely low levels as buyers snapped them up. New listings nationally trended 8.1 per cent higher than a year ago and 3 per cent above the five-year average, but total listings fell to 25.5 per cent below.

The acceleration of price growth across Sydney and Melbourne – up 3.7 per cent and 2.4 per cent respectively last month – saw both cities post all-time price highs and has positioned the larger capitals to now outpace many of the smaller cities, which were previously leading the charge in gains.

Sydney property prices are now 2.6 per cent higher than their July 2017 peak, which Mr Lawless said was a remarkable feat considering the 14.9 per cent drop in values through to May 2019 and the further 2.9 per cent fall recorded throughout the COVID downturn. Similarly, Melbourne housing values have recovered from the 11.1 per cent fall between 2017 and 2019, and the 5.6 per cent drop in values through the worst of the COVID-related downturn.

The broadbased rises are affecting all parts of the market, with regional Australia posting gains of 2.5 per cent. Hobart reported the most significant growth in the smaller capital city markets, up 3.3 per cent, followed by Canberra (up 2.6 per cent), Brisbane (up 2.4 per cent), Darwin (up 2.3 per cent), Perth (up 1.8 per cent) and Adelaide (up 1.5 per cent).

But Mr Lawless said the strong growth cycle is unlikely to last. While a recession and weakening economic conditions cut short the 1988 cycle and rising rates slowed growth following the 2003 and 2009 booms, he believes lending restrictions similar to those seen in 2015 will be the catalyst for slowing the market.

“Is there going to be another round of macro-prudential measures? I think it’s probably becoming a matter of when not if,” Mr Lawless said. “And the timing of any sort of credit tightening is highly uncertain.”

“The catalyst … is going to have to be seen in the credit statistics.”

“All eyes will be on how those statistics pan out through the March quarter and I think any further rise in those riskier types of lending metrics will be the trigger for a round of credit tightening.

“It will probably be fairly squarely aimed at ensuring household debt doesn‘t increase further, or that we don’t see any sort of financial stability risks, emanating from those rescue styles of loans,” he said.

Originally published as Home prices growing at fastest pace in over 32 years: CoreLogic