House Prices Increase At Highest Quarterly Rate In A Decade
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House Prices Increase At Highest Quarterly Rate In A Decade

The weighted average capital city median price is well up for houses and other dwellings.

By Kanebridge News
Wed, Jun 9, 2021 10:03amGrey Clock 2 min

Australian house prices are rising at the highest quarterly rate in 10 years, according to the latest Real Estate Market Facts report from the Real Estate Institute of Australia (REIA).

According to REIA President, Adrian Kelly, the weighted average capital city median price increased by 6.8% for houses and by 2.7% for other dwellings.

“Over the March quarter, the weighted average median house price for the eight capital cities rose to $873,911 with all cities increasing except Canberra. At $1,309,195, Sydney’s median house price continues to be the highest amongst the capital cities, 49.8% higher than the national average.  At $500,000, Perth has the lowest median house price across Australian capital cities, 42.8% lower than the national average.

“Over the 12 months to the March quarter, the weighted average capital city median house price increased by 11.1%.

“The weighted average median price for other dwellings for the eight capital cities increased to $621,313, a quarterly increase of 2.7%,” said Mr Kelly.

Mr Kelly also added that median prices for other dwellings increased in Sydney, Melbourne, Perth, Hobart and Darwin, remained steady in Brisbane and Canberra but decreased in Adelaide.

The median rent for 3-bedroom houses increased in all capital cities over the March quarter to a median of $452.50 per week.

“Over the past 12 months, the median rent increased in all capital cities except Melbourne where it remained steady.  Darwin had the highest annual growth at 17.3% and now has the second highest rent at $538.50 a week with Canberra the highest at $570 per week.

According to the report, the national capital city vacancy rate is at 3.3% primarily up due to Melbourne’s rate of 6.1%.

Mr Kelly concluded the growth coincides with the April 2021 Lending to Households and Business figures released by the Australian Bureau of Statistics which show that the value of new loan commitments for housing rose for the second consecutive month after a brief fall in February which came after eight consecutive months of growth.

 



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Stronger demand in some areas is pushing unit rents up faster than houses

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Renters are returning to the apartment market, leading to higher growth in weekly rents for units than houses over the past year, according to REA data. As workers return to their corporate offices, tenants are coming back to the inner city and choosing apartment living for its affordability.

This is a reversal of the pandemic trend which saw many renters leave their inner city units to rent affordable houses on the outskirts. Working from home meant they did not have to commute to the CBD, so they moved into large houses in outer areas where they could enjoy more space and privacy.

REA Group economic analyst Megan Lieu said the return to apartment living among tenants began in late 2021, when most lockdown restrictions were lifted, and accelerated in 2022 after Australia’s international border reopened.

Following the reopening of offices and in-person work, living within close proximity to CBDs has regained importance,” Ms Lieu said.Units not only tend to be located closer to public transport and in inner city areas, but are also cheaper to rent compared to houses in similar areas. For these reasons, it is unsurprising that units, particularly those in inner city areas, are growing in popularity among renters.

But the return to work in the CBD is not the only factor driving demand for apartment rentals. Rapidly rising weekly rents for all types of property, coupled with a cost-of-living crisis created by high inflation, has forced tenants to look for cheaper accommodation. This typically means compromising on space, with many families embracing apartment living again. At the same time, a huge wave of migration led by international students has turbocharged demand for unit rentals in inner city areas, in particular, because this is where many universities are located.

But it’s not simply a demand-side equation. Lockdowns put a pause on building activity, which reduced the supply of new rental homes to the market. People had to wait longer for their new houses to be built, which meant many of them were forced to remain in rental homes longer than expected. On top of that, a chronic shortage of social housing continued to push more people into the private rental market. After the world reopened, disrupted supply chains meant the cost of building increased, the supply of materials was strained, and a shortage of labour delayed projects.

All of this has driven up rents for all types of property, and the strength of demand has allowed landlords to raise rents more than usual to help them recover the increased costs of servicing their mortgages following 13 interest rate rises since May 2022. Many applicants for rentals are also offering more rent than advertised just to secure a home, which is pushing rental values even higher.

Tenants’ reversion to preferring apartments over houses is a nationwide trend that has led to stronger rental growth for units than houses, especially in the capital cities, says Ms Lieu. “Year-on-year, national weekly house rents have increased by 10.5 percent, an increase of $55 per week,” she said.However, unit rents have increased by 17 percent, which equates to an $80 weekly increase.

The variance is greatest in the capital cities where unit rents have risen twice as fast as house rents. Sydney is the most expensive city to rent in today, according to REA data. The house rent median is $720 per week, up 10.8 percent over the past year. The apartment rental median is $650 per week, up 18.2 percent. In Brisbane, the median house rent is $600 per week, up 9.1 percent over the past year, while the median rent for units is $535 per week, up 18.9 percent. In Melbourne, the median house rent is $540 per week, up 13.7 percent, while the apartment median is $500 per week, up 16.3 percent.

In regional markets, Queensland is the most expensive place to rent either a house or an apartment. The house median rent in regional Queensland is $600 per week, up 9.1 percent year-onyear, while the apartment median rent is $525, up 16.7 percent.

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