Australian capital city housing prices increased at a record pace in 2021, rising by 23.7% through the year to the December quarter according to data published by the ABS this morning. The national index indicated housing prices lifted by 4.7% in the December quarter and were up by 10% over the second half of the year. This compares with a 12.4% acceleration seen over the first half of 2021 during the peak of the housing stimulus measures. Similar to many other countries, housing prices in Australia have surged over the Covid period, rising by a remarkable 28.2% since the end of 2019.
The upswing in housing prices over the past couple of years reflects strong demand, boosted by a range of stimulus measures including very low interest rates, first home buyer incentives and construction subsidies, and has come at a time of constrained supply.
Charts from CoreLogic (below) illustrate this. Sales have surged over the Covid period (lower chart), but listings have declined (top-right chart). Listings fell in 2021 compared with 2020 and were well down on the levels seen in 2018 and 2019.
However, the seasonal rise in listings over the back half of 2021 (top-left chart) was stronger than in prior years, likely due to some catch-up from the disruptions of the Delta lockdowns in Q3 and also supported by the acceleration in prices.
One of the main themes that has emerged in Australia's capital city markets over the Covid period has been the preference for houses over units, in line with the desire for more space to facilitate working from home etc. There has also been a surge in renovations over the past couple of years that has supported this shift, with the HomeBuilder stimulus a major driver. Overall, on a pre-Covid comparison, house prices (30.5%) have accelerated at twice the pace for units (15%).
Turning to the capital cities, the smaller capitals led the price gains in Q4, with the Brisbane market seeing the fastest rise at 9.6% (27.8%Y/Y). Prices advanced in the 6% range in Adelaide, Hobart and Canberra, with annual gains pressing 30% for the latter two markets. Lagging behind was Darwin, with prices up by 1.5% in Q4 and 13%Y/Y.
In the Sydney market, price gains continued to slow coming in at 4.1% in the quarter from 6.2% in Q3 and 8.1% in Q2, this likely reflecting the headwind from affordability concerns. The median price in Sydney is comfortably the highest in the nation, above $1.1m according to CoreLogic's latest estimate. Over the year, Sydney prices advanced by 26.7%, a record rise.
Further south, the Melbourne market saw a similar rate of increase to the previous quarter rising by 3.9% in Q4. This left prices up by 20% over the year to be running at its fastest pace in more than a decade.
