Australian housing values increased a further 1.6% last month.
Taking home prices, 14.1% higher over the first seven months of the year and 16.1% higher over the past twelve months.
The annual change in national housing values is now the fastest we’ve seen since February 2004.
However in a sign, the housing market is losing some steam, the monthly growth rate has been trending lower since March earlier this year when the national index rose by 2.8%.
The gradual easing in the rate of housing value growth can probably be attributed to a combination of affordability factors and less stimulus.
With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community.
Along with declining home affordability much of the earlier COVID-related fiscal support, particularly fiscal support related to housing has expired.
On the flip side, demand is being stoked by record-low mortgages and the prospect that interest rates will remain low for an extended period of time.
The number of home sales is tracking approximately 40% above the five-year average while active listings remain about 26% below the five-year average.
This mismatch between demand and advertised supply remains a key factor placing upwards pressure on housing prices.
Although the pace of growth has slowed housing values continue to rise at a rate that’s well above average across most areas of the country.
The previously stronger performance across regional markets relative to the capital cities has normalised through 2021.
After the combined regional areas of Australia recorded stronger housing market conditions through the second half of 2020, the first seven months of 2021 show an almost equal rate of growth, with values up 14.5% across the regions and 14.0% across the capitals.
In another broad trend, houses continue to record much stronger growth in values relative to units.
At the macro-level, national house values are up 18.4% over the 12 months ending July while unit values have risen by less than half that amount, up 8.7%.
Clearly, there has been a shift in preferences away from higher densities, however, with affordability pressures mounting across the detached housing sector, we could see more demand gradually deflected back towards higher density housing options.
Advertised listing numbers remain well below average across most parts of the country, despite the number of new listings added to the market trending higher than average.
Recently, there has been some volatility in new inventory levels, with the number of newly advertised properties falling sharply across Sydney and Melbourne amidst the lockdowns.
We’ve seen the same trend through earlier lockdowns where both buyer activity and vendor activity reduce before recovering back to pre-lockdown levels once the restrictions are eased or lifted.
On the demand side, the number of home sales has held well above average over the year with CoreLogic estimating a 42% year-on-year lift in the number of sales.
The annual number of home sales hasn’t been this high since the year ending January 2004, with the past 12 months recording nearly 600,000 dwellings sold across the country.
That’s approximately 140,500 more sales than the decade average.
With stock levels remaining tight and demand so high selling conditions have been skewed towards vendors.
The combined capital cities auction clearance rate averaged 73% through July, and private treaty sales continue to record rapid selling times and low discounting rates.
Considering the tight advertised supply levels and high demand, prospective buyers are likely to be feeling a sense of urgency due to the level of competition in the market.
However, with affordability constraints starting to impact purchasing capacity it’s possible market activity could reduce through the second half of the year, helping to rebalance the market and take some further heat out of the rate of house price growth.