The COVID-19-induced house price weakness appears to be over as house prices rose in every capital city last month for the first time since the pandemic took its toll, but experts warn that big risks remain next year.
National home values rose 0.8 per cent over November to a median of $565,474, the latest CoreLogic Home Value Index, released on Tuesday, shows.
And if the current growth trend persists, national values are likely to surpass pre-pandemic levels in early 2021, after falling just 2.1 per cent between April and September, CoreLogic's head of research Tim Lawless says.
“If house values continue to rise at the current pace, we could see a recovery from the COVID downturn as early as January or February next year,” Mr Lawless said.
“The recovery in Melbourne, where home values remain 5 per cent below their recent peak, will take longer.”
Sydney values rose 0.4 per cent in the month, while Melbourne jumped 0.7 per cent, its first month back in positive territory since the pandemic hit.
Brisbane, Adelaide, Hobart and Canberra all reached record highs in November, according to the index, while Darwin and Canberra recorded the biggest jumps in home values – rising 1.9 per cent to medians of $405,857 and $672,866, respectively.
House and unit prices diverged, with strong house price growth of 1.1 per cent over the past three months lifting city-wide property values, while the unit market fell 0.6 per cent in the same period, Mr Lawless said.
“This trend towards stronger conditions in detached housing markets is evident across most of the capital cities,” he said.
“Relative weakness in the unit market can be attributed to factors including low investment activity, higher supply levels in some regions and weaker rental market conditions across key inner-city unit precincts.”
Sydney house prices rose 0.9 per cent in the past month to a median of $1,000,170, while unit prices fell 0.7 per cent to a median of $728,168.
Melbourne's median house price rose 0.6 per cent to $790,543 and its median unit price also increased 0.7 per cent to $568,056.
Mr Lawless said Melbourne's unit market values were “surprising” but an exception that would be short-lived unless overseas migration turned around sooner than expected.
Even so, the pandemic-induced price weakness appears behind us, despite pockets of risk, Domain senior research analyst Nicola Powell says.
The question of when international borders would reopen as well as the end to government income support and mortgage holidays remained the biggest headwinds for the property market.
“We have so much government stimulus masking the true effects of COVID … we won't see the true impacts until [that ends],” Dr Powell said. “The question now is how soon international borders will reopen to restore the imbalance in pockets of the rental market.”
Apartment-heavy investor markets close to capital city central business districts are at greater risk, according to Dr Powell.
“It's a question of how many of these investors can weather this disruption … if we do see rental markets disrupted for a longer period of time they'll start offloading,” she said.
“It seems like the weakness in price that occurred during COVID is now behind us but there are still risks that remain ahead even though all cities are growing and are extremely resilient.
“There are still pockets of vulnerabilities in our cities but it looks like our markets are going back on track.”
In the meantime, the limited number of homes on the market in the face of strong buyer demand from owner-occupiers in a low-interest rate environment is fuelling the property market's recovery, according to the index.
***Source: Domain - Tawar Razaghi