Unit prices prove resilient in a post COVID property market
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Unit prices prove resilient in a post COVID property market

It’s easy to think that it’s all doom and gloom for Australian property values, but for long term owners and investors, there’s still reasons to be cheerful

By KANEBRIDGE NEWS
Fri, Feb 17, 2023 10:39amGrey Clock 2 min

There were so many aspects about COVID 19 that were unprecedented, from the changes to daily working life to the impacts on mental health of extended periods of lockdown.

In the property world, it was also an untested period, with some sectors of the market predicting prices would fall. What happened instead was an escalation in prices from March 2020 onwards as the notion of home as sanctuary accelerated interest in property in urban and regional areas.

As governments around Australia moved away from zero COVID targets and life began to look a little more normal, property values appeared to dramatically fall in 2022. However, for those in the property market for the long haul, the news is positive.

Latest research from property data provider, CoreLogic reveals that while national unit values fell -6.1 percent in the past nine months, they are still 7.3 percent higher than those recorded in March 2020. National house values are 17.3 percent higher than they were prior to the pandemic.

Results are mixed across the capitals, however. While most markets continue to record values between 10 percent and 50 percent above pre- covid levels, CoreLogic reports that units in Sydney and Melbourne are almost back to their pre pandemic values.

Outside the major capitals, regional growth for units remained positive, however, consecutive interest rate rises are expected to take a toll.

“Following a temporary reprieve in interest rate rises in January, the RBA’s 25 basis point increase announced in February was accompanied by a marked change in tone,” the report said. “Previously optimistic, the Board reiterated its commitment to fighting inflation, noting that further rate hikes would be needed to get inflation under control. 

With many economists now expecting the cash rate to settle closer to 4 percent than 3 percent, the outlook for unit values, and the broader property market, remains skewed to the negative.”



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Property values have experienced strong growth around the country, but there are two highly desirable areas where oversupply is putting downward pressure on sales

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While property values are rising strongly in most markets across Australia, it’s a vastly different story in Victoria and Tasmania, new data from CoreLogic shows. Over the 12 months to May 31, the median house price lifted just 1.8 percent in Melbourne and fell 0.6 percent in regional Victoria. The median dipped 0.1 percent in Hobart and ticked 0.4 percent higher in regional Tasmania. This is in stark contrast to Perth, where values are up 22 percent, and regional Western Australia, up 14.8 percent; as well as Brisbane, up 16.3 percent, and regional Queensland, up 11.8 percent.

CoreLogic Head of Research, Eliza Owen says an oversupply of homes for sale has weakened prices in Victoria and Tasmania, creating buyers’ markets.

On the supply side, there has been more of a build-up in new listings than usual across Victoria, even where home value performance has been relatively soft,” Ms Owen said. Victoria has also had more dwellings completed than any other state and territory in the past 10 years, keeping a lid on price growth. The additional choice in stock means vendors have to bring down their price expectations, and that brings values down.”

Melbourne dwelling values are now four percent below their record high and Hobart dwelling values are 11.5 percent below their record high. Both records were set more than two years ago in March 2022. The oversupply has also affected how long it takes to sell a property. The median days on market is currently 36 in Melbourne and 45 in Hobart compared to a combined capitals median of 27. It takes 55 days to sell in regional Victoria and 64 days in regional Tasmania compared to a combined regional median of 42 days.

Changes in population patterns have also contributed to higher numbers of homes for sale in recent years. Since COVID began in early 2020, thousands of families have left Melbourne because working from home meant they could buy a bigger property in more affordable areas. While many relocated to regional Victoria, a significant proportion left the state altogether, with South-East Queensland a favoured destination. Meantime, Tasmania’s surge in interstate migration during FY21 was short-lived. Data from the Australian Bureau of Statistics shows the island state has recorded a net loss of residents to other states and territories every quarter since June 2022.

Record overseas migration has more than offset interstate migration losses, thereby keeping Victoria’s and Tasmania’s populations growing. However, the impact of migrants on housing is largely seen in the rental market, so this segment of population gain has done little to support values. Growth in weekly rents has been far stronger than growth in home values over the past year, with rents up 9 percent in Melbourne and 4.8 percent in regional Victoria, and up 1 percent in Hobart and 2.7 percent in regional Tasmania.

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