The decline in Australian capital city property prices following the onset of the Covid-19 pandemic was confined to a 1.8% fall in the June quarter, with the ABS reporting a 0.8% rise nationally in the September quarter, according to its latest release this morning. The pace of growth through the year moderated from 6.2% to 4.5%. Prices lifted in every capital city in Q3 except for Melbourne where activity in the residential property market was heavily affected by the shutdown. The largest price gains in Q3 were in the 'second-tier' markets of Adelaide (1.6%) Brisbane (1.5%) and Perth (1.4%).
An interesting aspect of today's report was that the turnaround in conditions in the property market may have come through earlier than previously thought. Timelier data compiled by CoreLogic had been indicating that capital city property prices declined all the way through Q3 before starting to rise from October (0.2%) and then elevating at a stronger pace in November (0.7%).
A summary of the price changes nationally and for each capital city market in Q3 is provided in the table below. With the exception of Melbourne, house prices outperformed units in the quarter and this likely reflects the differences between the owner-occupier and investor segments of the market. A range of stimulus measures such as the HomeBuilder scheme and first home buyer supports have been shown to have had a noticeable impact on detached housing in the owner-occupier segment in particular, whereas investors that typically favour units have been confronted with elevated vacancy rates in the capital cities and this has likely been weighing on sentiment in that segment. Despite the pandemic and its broader economic impact, annual growth in prices to Q3 was positive in every market except for Darwin, which contrasts sharply with the same point in 2019 where price growth was negative through the year in all markets outside of Hobart. Notably, annual price growth in Perth (2.4%) is now at a 5-year high, while it is at 3-year highs in Brisbane and Canberra.
For most of the nation's capital cities, the onset of the pandemic effectively brought on a pause in activity in the property market. This led to relatively modest declines in prices across the capitals, as the chart below shows. However, as restrictions were eased and following the introduction of policy stimulus, prices have started to rise again. But in Melbourne, prices continued to decline in Q3 as the shutdown there remained in place. Over the medium to longer term, the key issue that could slow the momentum and weigh on prices is low population growth if, as seems likely, restrictions on the international borders remain in place for an extended period.
The effects of the pandemic on property prices at an aggregate level nationally and in each capital city are summarised in the chart below. In Q2, prices declined in every capital city except for Canberra due to the impact of the shutdown on property market activity, with the steepest falls coming in Syndey (-2.2%) and Melbourne (-2.3%). In Q3, prices started to rebound across the nation, though they continued to fall in Melbourne (-0.3%) after the reversal of its reopening. As a result, Melbourne prices have fallen by more over the pandemic period (-2.5%) than any other market. Relative to Q1 2020, prices also remain lower nationally (-1.0%) and in Sydney (-1.2%) and Darwin (-0.6%). In contrast, after strong performances in Q3, prices in Canberra (1.6%), Hobart (0.8%), Adelaide (0.7%), Perth (0.7%) and Brisbane (0.6%) are now all higher than they were before the onset of the pandemic reflecting the return to more normal activity and the policy stimulus impact.
