Delta turmoil hits Sydney and Melbourne property markets but prices still rising strongly

While ‘delta’ disruptions are clearly having a marked impact on our property markets’ activity, the impact on prices looks to be minimal to date.

Australian dwelling prices posted another solid gain in August despite significant COVID-related disruptions to the Sydney and Melbourne markets.

The CoreLogic home value index, covering the eight major capital cities, rose 1.5% in the month after a 1.6% rise in July – a relatively strong gain, albeit down on the red-hot pace seen in the first half of 2021 when monthly rises were in the 1.9-2.8% range.

Overall property prices are up 17.5% over the last year.

Westpac measures the 3 month annualised pace of gains which has eased back to just over 20% from a cracking 30% peak in May.

Market turnover saw significant COVID disruptions in the month.

In their latest housing report, Westpac estimates there has been a 6% fall in sales nationally in seasonally adjusted terms.

Sales look to be down about 16% over the last month in Sydney and over 40% last month in Melbourne, the latter likely reflecting somewhat stricter measures that have seen real estate markets essentially shut during the city’s intermittent lock-downs.

Sales look to be up about 4.5% over the month across the rest of Australia on a combined basis.

Price-wise, Sydney, and Melbourne have been the main drivers of the slowing in momentum since May but both still posted reasonably solid gains in August despite intensifying virus disruptions:

Sydney up 1.8% last month, +20.9% over the year
Melbourne up 1.2% last month, +13.1% over the last year.
Brisbane is starting to look like a clearer frontrunner, prices posting another 2% gain to be up 18.3%over the last year.
Adelaide also posted a robust 1.9% monthly gain to be up 17.9% over the year.
CoreLogic did not report figures for Perth and WA due to technical issues.
Canberra and Hobart posted more strong increases, up 2.2% and 2.3% respectively last month with annual growth running well above 20% for both markets.
Prices flattened in Darwin but are also up over 20% last year.
Regional areas also posted a solid 1.6% monthly gain on a combined basis nationally to be up 21.6% over the year. However, performances are becoming more varied with strong gains in regional NSW and regional Tas but moderations evident across other regions.

Houses continue to outperform slightly, up 1.6% last month vs 1.1% for units – annual gains showing a much bigger wedge, +20.5% over the year vs +8.9% for units.

That said, the slowdown since the start of the year has been more pronounced for houses which had led strong burst in late 2020/early 2021.

A similar pattern is evident across price tiers, within the ‘top 25%’ of properties by value outperforming but also recording a more pronounced slowing in momentum from a stronger starting point early in the year.

This is more than just a Sydney-Melbourne vs rest dynamic with the same variations in performances apparent across all major capital city markets, including across houses and units.

With much of Australia being in a Covid Cocoon, further slowing in price momentum in the most heavily impacted markets is likely but the strength and tightness of markets leading into the shock and the continued bullishness of consumer price expectations suggest an outright price correction is highly unlikely and that a rapid re-acceleration is likely if and when virus restrictions are eased.

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