The housing market in Australia has had a record-breaking year, with prices rising at the highest rate in history. Australian house prices increased by 21.9% this year, despite Australia kicking off the year in lockdown and the looming prospect of another year dealing with coronavirus inflicted economic paralysis. What caused the unexpected history-making jump?
The housing market has been booming for some time, but it has been abundantly evident in 2021 how Australians prioritise property ownership. The possible reasons behind the tremendous price growth include ultra-low home loan rates, government stimulus, improving economic conditions, returning ex-pats, and more COVID lockdown induced household savings.
With increased inventory available for sale and hints of weaker demand, this year’s end-of-year sales ramp-up appears to be less robust than it was last year, though we could still see an acceleration in the final few weeks before Christmas.
Preliminary weekly property sales figures for 2021 are showing weekly sales being 41.4% higher compared to the last year, according to the Australian Bureau of Statistics. Victoria led the way with a 56.8% increase over 2020, followed by the Northern Territory at 44.7%. The lowest growth was seen in Tasmania with ACT just ahead, though still very punchy increases at 17.1% and 19.3% respectively.
Across the year, more than 446,000 houses and 144,000 apartments were sold, with both sitting on the market for the lowest time in more than a decade.
The median house prices in three capital cities, Sydney, Melbourne, and Canberra, are already over $1 million, and the median capital city price nationwide is now approaching seven figures. The biggest year-on-year increase in median unit prices was experienced in Adelaide (11.5%), followed by Darwin (11.1%). The average price of a capital city apartment has risen to a new record high of $621,880, notwithstanding the value growth gap between the two forms of housing (up by 7.7% year-on-year).
With a 33.1% year-on-year increase in Sydney’s median house price, the city’s most populous metropolis currently has a median house price of $1,601,467. At $1,178,364, the median property price in the nation’s capital has risen to the second-highest level in the country. House prices in Hobart jumped by 34.4% in 2021, to a median price of $752,110 (up from $558,732).
According to popular real estate portal Domain, there is still hope for purchasers who are keen to get into the market. Booming market prices are compelling some property owners to cash in and list their properties for sale, leading to higher listing rates. New listings are arriving on the market faster than they are being sold at this point.
While it is still a seller’s market, the market could gradually shift in favour of buyers. Looking ahead, 2022 is expected to be a good year for homeowners, but not as good as 2021’s near-insatiable increase. New listings are more likely to stay high, especially in the late summer and early autumn.
As more inventory becomes available for sale and more individuals are able to purchase, sales volumes should remain elevated in the following weeks and months (notwithstanding the seasonal slowdown). However, as more individuals purchase, the sales trend may shift if customer demand continues to dwindle.
Demand is projected to moderate from recent highs; fewer disruptions from lockdowns should result in a regular supply of new listings, and rising interest rates could cause price rises to slow or even reverse. High prices, a record year in 2021 and rate increases could lead to the volume of competition for home buying diminish in 2022, which is good news for purchasers. In general, it appears as though we are experiencing the first indicators of a move away from an extreme sellers’ market and toward more balanced conditions between buyers and sellers.