Resurgence of investors prompts continued strength in dwelling markets: NAB CoreLogic report
Australia’s housing market remains "firmly entrenched" in a housing boom across most of the country, the recent NAB CoreLogic Housing market update noted.
The resurgence of investor participation, and high levels of activity in the owner occupier non first home buyer segment, may account for the continued strength in dwelling markets despite affordability constraints, it noted.
"The reduction in federal government fiscal support seems to have had little to no impact on housing demand or growth in home values to-date," it advised.
"While future COVID outbreaks presents both a health and economic risk, the strong recovery in the labour market has likely mitigated the impact of removing the JobKeeper’s program."
NAB advised it was expecting housing values will continue to rise throughout 2021 and into 2022, "albeit at a gradually slower pace."
"Domestic demand should continue to be supported by the expectation that mortgage rates will remain at their record lows for some time, as well as the ongoing high levels of consumer confidence as the economy expands at a faster than average pace.
"A slowdown in dwelling price appreciation is expected as affordability constraints progressively impact market participation, and potentially tighter credit policies looms further down the track.
"The resurgence of investor participation, and high levels of activity in the owner occupier non first home buyer segment may account for the continued strength in dwelling markets despite affordability constraints.
"Over the medium term, a rise in housing supply together with the demand side impact of closed international borders is likely to be another factor that weighs on price appreciation," the report advised.
Housing markets around Australia surged in May with CoreLogic’s national Home Value Index up 2.2%, stronger than the 1.8% lift in April, but weaker than the 32-year high recorded in March when values surged 2.8%.
Growth conditions remained broad based with home values up by more than 1% across every capital city over the month, with both house and unit values lifting across the board.
Of the 334 sub-regions analysed by CoreLogic, 97% of them have recorded a lift in housing values over the past three months.
"Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets," the NAB noted.
Across the capital cities, the monthly change in dwelling values ranged from a 1.1% rise in Perth through to a 3.2% jump in Hobart. Across the non-capital city regions, regional NSW led monthly gains with a 2.5% increase, while values in regional WA had the weakest result dipping one tenth of a percentage point.
"The most expensive end of the market is now driving the highest rate of price appreciation across most of the capital cities, whereas early in the growth cycle it was the most affordable end of the market that was the strongest.
"From a geographic perspective, it was the smaller capital cities that led the housing market out of the COVID slump, but now Sydney has risen through the ranks to record the largest capital gain over the past three months with values up 9.3%.
"Another trend that is changing is the stronger performance across regional areas of Australia. While regional markets led the early stages of the latest growth phase, the performance gap has narrowed substantially between the capitals and regional areas.
"For the second time in three months, growth conditions in capital city home values outpaced the regional markets."
The combined capital city index rose 2.3% in May compared with a 2% rise across the combined regional areas.
CoreLogic estimates sales activity over the three months to May was tracking about 37% higher than the five-year average.
"The sales to new listings ratio remains around 1.1, meaning for every new listing there is more than one sale occurring.
"This rapid rate of absorption is keeping advertised inventory levels extremely low, despite the rise in new listings.
"As a consequence, vendors remain in a strong selling position while buyers have a weak position at the negotiation table."
With housing sales activity continuing to outpace the number of new listings added to the market, the total number of homes advertised for sale remains approximately 24% below the five-year average.