Annual property price gains hit 17-year high: CoreLogic

Housing experts are predicting property prices will rise 20 per cent by the end of the year after annual gains reached a 17-year high through July.

Selling a house in Geelong.

Housing experts are predicting property prices will rise 20 per cent by the end of the year after annual gains reached a 17-year high through July.

Monthly data from property researcher CoreLogic found prices climbed a further 1.6 per cent last month, culminating in an annual gain of 16.1 per cent. The figure was on par with rises last experienced in February 2004, with a majority of the growth (14.1 per cent) achieved this calendar year.

Three out of eight capital cities – Darwin (up 23.4 per cent) Hobart (up 21.9 per cent) and Canberra (up 20.5 per cent) – have surpassed 20 per cent growth in the year to July, with Sydney likely to join them in recent months.

AMP chief economist Shane Oliver expects national prices to reach that 20 per cent threshold by the end of year.

“Allowing for some additional slowing in home price gains in the next month or so as a result of the lockdown, average capital city home prices are still likely to be up by around 20 per cent this year,” Mr Oliver said.

“However, we expect a sharp slowdown to just 5 per cent price growth through next year.”

The big banks are also in consensus, with Commonwealth Bank firming up its 20 per cent national growth prediction. NAB differs slightly, anticipating a lower 19 per cent gain and continued strong growth through 2022.

Despite lockdowns in Sydney, Melbourne and Adelaide last month, all capital cities reported increases in housing values through July, according to the CoreLogic data. The most significant increases were in Canberra (up 2.6 per cent), Sydney (up 2 per cent) and Brisbane (up 2 per cent). Darwin, Hobart and Adelaide each rose 1.7 per cent last month, while Melbourne (up 1.3 per cent) and Perth (up 0.3 per cent) were softer.

Mr Oliver expects the cyclical pressure on the housing market to force prices lower in the medium term, but this will largely be determined on current economic decisions.

“Our base case remains that 2023 is likely to see the start of another cyclical downturn in property prices as the interest rate cycle starts to move up more decisively, and we are expecting a 5 per cent fall in house prices that year, although there is a risk that the hit to the economic outlook if lockdowns are extended drives this into 2024,” Mr Oliver said.

The risk of lockdown will be a continued factor of market performance moving forward, said CoreLogic’s research executive Tim Lawless. Consumer confidence has taken a hit as a result of concurrent Covid-19 outbreaks around the county, which has had a flow-on effect to the property market.

The number of sellers choosing to list their homes last month in Sydney and Melbourne fell sharply as a result of extended lockdowns, with Mr Lawless warning Brisbane market may follow suit if the current outbreak isn‘t controlled

“Listing numbers in Sydney have been reducing quite sharply, much more than what you‘d normally expect through winter when the market seasonally tends to slow down.

“With Brisbane moving into a lockdown now, if that does get extended beyond the three days, which is looking possible, then you‘d have to expect there’s going to be a similar impact on vendor activity as well.

However, buyers are still out there. NAB’s executive of home ownership, Andy Kerr, said the bank recorded its strongest month of home lending on record in June, showing “the appetite for Australians to buy a new home is at an all-time high.”

Mr Lawless said continued outweighing in supply versus demand could continue to put upward pressure on property prices.