Australian Property Prices Post Biggest Monthly Gain in 17 Years
Australia’s housing market is booming again, with the biggest monthly price gain in 17 years dispelling fears of a Covid-induced downturn. Nationwide house values surged 2.1% in February, the largest increase since August 2003, CoreLogic Inc. data released Monday showed. Capital city prices gained 2%, led by Sydney and Melbourne. “Australia’s housing market is in the midst of a broad-based boom,” said Tim Lawless, head of research at CoreLogic. The rapid gains have been “spurred on by a combination of record-low mortgage rates, improving economic conditions, government incentives and low advertised supply levels.” While housing prices are surging from Singapore to Canada and the U.S., a return to boom times in Australia threatens to swell an already worrisome pile of household debt and make it harder for young people to get a foot on the property ladder. Sydney is the world’s third-least affordable housing market, and Melbourne the sixth, according to a report last week. The nation’s property values have taken off again after the central bank slashed interest rates to a record low and said they’ll stay there for at least three years. People are also looking for larger houses with space to work from home, while the rapid price growth has rekindled a fear of missing out, sending buyers flocking to the market. That could see home prices surge 16% over the next two years, according to Commonwealth Bank of Australia, the nation’s largest mortgage lender. An auction for a small, dated two-bedroom house in the inner Sydney suburb of Paddington on a recent Saturday attracted more than 250 people. Bidding began at A$1.4 million ($1.1 million) — A$150,000 over the reserve and immediately knocking most would-be buyers out of the race. It eventually sold for just shy of A$1.7 million, A$450,000 above the reserve. “We are seeing a significant increase in demand across all price points and all suburbs,” said real estate agent Ben Collier, who handled the Paddington sale. Usually “you see different markets moving at different speeds, whereas it seems to be somewhat more uniformed right now.” In New Zealand, where home prices soared 13% in January from a year earlier, the problem is so acute the government will now require the central bank to consider the impact on housing prices when setting interest rates, a change the bank opposed. The Reserve Bank of New Zealand is also reimposing lending restrictions on property investors in an attempt to cool the market.
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