Australian property prices grow in value for the first time since the pandemic

Houses and units both went up in value over the last quarter, according to a new report, posting gains for the first time since the pandemic put prices in freefall.

The value of units in some capital cities still fell, but the drops weren’t enough to offset the national average, defying a trend that’s taken place for five consecutive months.

A change in momentum

Across the country, property prices lifted on average over the September quarter, according to Domain’s House Price Report.

Houses gained 0.9 per cent in value for the quarter for median prices of $776,144, pushing the annual lift to 4.6 per cent. Meanwhile, units posted gains of 0.1 per cent to push quarterly prices to $549,253, bucking a five month trend of shedding value, and lifting annual gains to 2.2 per cent.

"Nationally, house prices recovered half of the value lost over the previous quarter, although values are below that seen pre-pandemic,” Dr Nicola Powell said, senior research analyst at Domain.

“Buyers have been lured back into the market by low interest rates, government tax cuts and other incentives and the easing of coronavirus restrictions, as well as a change in housing preferences post-lockdown."

But the picture was much more chequered than the bottom line of the national average. Whereas house prices continued to go up in value in every capital city, unit prices shed value in four capital cities.

For the quarter, Sydney units dropped in value by 0.2 per cent and Melbourne by 0.1 per cent. Drops in Tasmania and Canberra units were more substantial for the quarter, shedding 9.1 per cent and 2.1 per cent respectively.

Median House Prices, as per Domain

Median unit prices, as per Domain

Properties have lost thousands, but some have already recovered

The Australian Bureau of Statistics (ABS) estimates the average home lost about $12,500 in value in the nine months since the beginning of the year.

The value was shed in five consecutive months following the COVID-19 lockdowns introduced in March, a time when the pandemic roiled uncertainty across industries, businesses and the routines of daily life.

Analysts, economists and banks expressed concern that the property market was on its way to losing as much as 15 per cent in value, according to some estimates. (These estimates have since been reigned in.)

But the most recent quarterly results offer some optimism that the worst of the property fall has passed. Melbourne’s exit from one of the world’s longest lockdowns -- after taming a second wave of the COVID-19 pandemic -- has only contributed to the sentiment.

Westpac, which revised its forecast of a 10 per cent property fall to 5 per cent, has said people have the confidence to spend their money buying houses again. The bank’s most recent consumer confidence index found people’s enthusiasm to buy a house had reached levels not seen since 2019.

“Confidence in the housing market has boomed,” Bill Evans said, chief economist at Westpac. “Of all the results in this … survey, this one is the most surprising and reassuring.”

Backing the growing sentiment is a solid increase in the value of owner occupier loans being issued. The ABS revealed $16.3 billion in loans for 12,302 properties were approved in August, a rise of 13.6 per cent -- the largest increase since records were established 18 years ago.

Housing affordability hits a decade high

People are spending a smaller portion of their income on mortgage repayments, according to analysts, causing housing to reach affordability levels not seen in ten years.

Two income households were spending 23 per cent of their monthly earnings on mortgage repayments in September, Moody’s Investor Service said, a drop from the ten year average of 26 per cent.

“The affordability of apartments and houses improved in all capital cities over the year to September,” the analysts said.

Several reasons contributed to the drop in mortgage spending on housing.

The cost of servicing a mortgage has dropped to record lows not seen in three decades, fuelling a refinancing boom as people take the opportunity to seize on lower repayments.

Then there’s the falling price of property, which has led to new buyers having to spend less on a piece of land they can call their own.

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