Rebounding house prices surge to record highs

House and unit values are growing once more after recovering from a sharp drop brought about by the coronavirus pandemic.

Property values rose 0.8 per cent in the September quarter, according to data from the Australian Bureau of Statistics (ABS), gaining $87.8 billion in value to reach the record high of $7.3 trillion.

The results represent a stellar rebound when compared to the preceding quarter, where the COVID-19 pandemic plunged the country into an economic crisis, directing property values downwards to uncertain lows. The average home had lost $12,500 in value in the first six months of the year.

Prices were up in all capital cities across the country by the end of the September quarter -- other than Melbourne. Sydney and Brisbane properties experienced the strongest growth, posting lifts of 1 and 1.5 per cent respectively.

Melbourne -- still reeling from one of the longest lockdowns in the world, which helped tame a second wave of the pandemic -- had values fall by an average of 0.3 per cent.

The average Australian home was valued at $689,500, Andrew Tomadini said, head of price statistics at the ABS.

"Results for Sydney and Brisbane are in line with housing market indicators. New lending commitments to households, auction clearance rates and sales transactions all improved during the September quarter,” Mr Tomadini said.

"Property prices continued to fall in Melbourne in the September quarter, due to the impacts of COVID-19 restrictions.”

Experts had forecastproperty values to break records in February; however, a 12 month rise to September of 4.5 per cent was enough to beat expectations.

Inner city units show some signs of recovery

The lockdown of international borders, a health measure introduced to contain the global spread of the COVID-19 coronavirus, heavily impacted the inner city areas of Melbourne and Sydney, by cutting off access to a key demographic of renters: international students and migrans.

The result of having a lot of units advertised for rent and a lot less renters was a drop in both property and rental values.

But the September quarter data indicates unit property values are stabilising -- and perhaps recovering.

While house prices rose by 1.4 per cent in Sydney, so too did units by 0.2 per cent.

The story in Melbourne was more about a slow down in unit values dropping. House values fell by 0.3 per cent, but unit values fell by less: 0.2 per cent.

But we’re in a pandemic. So why are property values going up?

There’s an understandable disconnect between a pandemic induced recession and record high property prices, and there are many reasons for the rebound.

The first has to do with measures put in place to stop things from getting worse.

There’s the government’s stimulus payments, such as JobSeeker, JobKeeper and JobMaker, which helped keep people in work or keep money in their pockets.

And banks hitting pause on mortgage repayments for six to ten months. This gave people out of a job time to sort out their finances and the chance to recover.

Then there were policies put in place to make the cost of living cheap. This includes dropping the cash rate -- a guardpost used by banks to set the cost of interest -- to 0.10 per cent, an all time low that led to more than 50 banks offering mortgages below 2 per cent.

The second reason for the rebound has to do with making things better by giving people the confidence to spend.

The government’s role has been notable in this area too, with incentives including Homebuilder and the First Home Loan Deposit Scheme.

Combined with the lure of cheap mortgages, these measures made the prospect of buying a home too good to pass up, mostly by offering grants or making it easier for people to buy a home.

The incentives have led to the number of people signing up for mortgages jumping by 30 per cent in October, according to the ABS, when compared to the same period the year before.

Meanwhile, the number of people seeking council approval to build a house reached a high not seen in 20 years.

The rebound in the home market is an indicator the country is leaving the recession behind, Craig James said, chief economist at CommSec.

“The Aussie economy is firmly in recovery mode,” Mr James said.

“Now we just need to keep a focus on jobs to see whether the recovery is generating the sort of growth that authorities are looking for.”

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