Australian residential prices strengthen

As with many other cities around the world, the strength of the property market heading into the pandemic influenced the speed in the recovery once covid-19 restrictions began to ease. Most Australian cities were well-positioned to take advantage of the spring selling season to meet pent-up demand and this appetite is likely to continue heading into the new year.

Australia ranked 29th globally for annual property price growth in Q3 2020 with growth of 4.1%. Australia’s property market has continued to remain resilient, albeit moderated, throughout the pandemic bolstered by significant economic stimulus, including the recently extended HomeBuilder grant and pent-up demand from those previously priced out of major city markets.

For those fortunate to not lean on additional government support as the economy paused, have seen a rise in household savings whilst living through the pandemic. Investors have returned to the market as we see more mortgage rate compression, and this is likely to fuel further growth in 2021.

Key Drivers
Australia’s economy contracted by 3.8% in the year ending September 2020, with the unemployment rate at 6.9% in September 2020 (ABS).

The official cash rate target was 0.10% as at December 2020. In the September 2020 quarter, average mortgage lending rates to owner occupiers fell by 101 bps to 2.35% for a 3-year fixed term loan and was down 42 bps to 4.52% for a standard variable loan. By comparison, for investors, a 3-year fixed term fell by 109 bps to 2.71% and a standard variable loan was down by 42 bps to 5.10% (RBA).

New household loan commitments were up 20.0% in Q3 2020 across Australia, and residential building approvals were up 8.3%; when compared to Q2 2020 (ABS).

The weighted average total residential vacancy for Australian capital cities was last recorded at 3.0% in September 2020, remaining stable over the past quarter (REIA).

Houses
Median house values across Australia rose 4.6% in the year ending September 2020 (up 0.9% in the last quarter) to $812,000. There were 68,146 house sales across Australia in the September 2020 quarter, rising 8.7% on the previous quarter.

Gross rental yields rose 1 bps in the third quarter of 2020 with Australian houses averaging 4.13%. Median house rents across Australia increased by 2.4% in Q3 2020 to stand at $430 per week (APM).

Apartments
Median apartment values across Australia rose 2.2% in the year ending September 2020 (up 0.1% in the last quarter) to $561,500. Across Australia, there were 19,225 apartment sales in the September 2020 quarter, rising 3.4% on the previous quarter.

In the third quarter of 2020, gross rental yields fell 16 bps with Australian apartments averaging 4.00%. Across Australia, median apartment rents remained steady in Q3 2020, at $430 per week (APM).

How did each city perform? Read our latest Australian Residential Review here.