Australian capital city property prices surged up at a near-record pace in the March quarter rising by 5.4% according to the ABS's series released this morning. With policy stimulus continuing to drive activity, price growth has stepped up sharply from the rises recorded in the previous two quarters (0.8% in Q3 and 3.0% in Q4) after the onset of the pandemic and associated restrictions drove a 1.8% fall in the June quarter.
There was an acceleration in price growth in all capital city markets in the March quarter as detached house prices (6.4%q/q) continued to rise at a much faster pace than for units (2.7%). Shifts emerging since the onset of the pandemic are contributing to this through a preference towards detached housing in lower-density suburban areas as well as policy stimulus measures that have been more directed towards boosting activity in the owner-occupier segment, particularly first home buyers, rather than investors.
Prices in the Sydney market advanced by 6.1% for the quarter, recording their sharpest increase in nearly 6 years. Detached house prices surged by 8.0%q/q compared to a modest 2.6% rise for units. Overall, this leaves Sydney prices 8.0% higher than a year earlier, with the ABS reporting that the mean price in the city lifted through the $1m level; a first for any Australian capital city. Matching Sydney's 6.1% increase was the Hobart market where prices stand 10.2% above their year-ago level. Prices in Canberra lifted by 5.6% in Q1 to be up 10.9% through the year. Unlike the other capitals that saw larger falls as the pandemic emerged, its effect was modest in Hobart where prices only fell 0.4% in Q2 last year and prices in Canberra still lifted (0.8%). However, both of these markets are still experiencing a sharp acceleration.
Next strongest was the Perth market where prices lifted by 5.2% for Q1. Additional state government incentives have been available there for first home buyers, reflected by house prices rising at their fastest quarterly pace (5.5%) in more than 11 years. Melbourne prices stepped up to a 5.1% rise in Q1 from a 3.4% lift in the previous quarter. Annual growth in Melbourne is running at the slowest pace of all capital city markets (5.9%) reflecting a more delayed pick-up due to the extended lockdowns in the state last year. In the top end, Darwin recorded a 4.7% quarterly rise; its strongest since Q4 in 2009. Prices in both the Brisbane and Adelaide markets were up by 4.0% for Q1, with both also up 7.5% through the year. The annual pace of uplift is the strongest it has been for either market since 2010. The main difference is a more pronounced outperformance in house prices relative to unit prices in Brisbane compared with Adelaide. Brisbane house prices advanced 4.6% in Q1 (8.3%Y/Y) compared to a 1.9% rise for units (4.0%Y/Y), whereas in Adelaide house prices were only a little stronger (4.3%) than for units (3.2%) in Q1 and for the year: houses 7.8% to units 6.3%.
Higher frequency data complied by CoreLogic has reported that the price gains may have topped out in March, though the pace of increase has still been strong in rising by 1.8% in April and then 2.3% in May on a combined capital city basis. Overall, the near-term momentum very much resides with the weight of stimulus measures, though with this has come rising concern over affordability, with last week's Westpac-Melbourne Institute Consumer Sentiment Survey reporting that attitudes towards purchasing a dwelling have turned pessimistic for the first time since April last year. There are also other headwinds for prices but these are longer-term in nature from low population growth with the international borders closed and potential oversupply should much of the record high level detached dwelling approvals be constructed.
