The median house price for a house in Australia has soared past $1 million as capital city prices rocket to record levels, according to new research, putting housing affordability firmly back in the spotlight.
Ultra-low interest rates continued to drive buyers to the property market right through to the end of 2021, and coupled with a lack of supply, pushed house prices up to eye-watering levels in nearly every capital city, the latest Domain House Price Report, released on Thursday, shows.
Nationally, house prices rose 25.2 per cent in 2021, and six out of the eight capitals hit record house prices during the December quarter.
Sydney’s median price is now a staggering $1,601,467, Melbourne’s median is $1,101,612, Hobart rose to $752,110 and Canberra – now the second-most expensive city in the nation in which to buy a house – grew by a massive 11.3 per cent over the quarter to a median price of $1,178,364.
Brisbane’s median house price jumped by 10.7 per cent in the December quarter alone to a record median price of $792,065, while Adelaide rose by 8.6 per cent to $731,547.
Only Darwin, where the median flatlined at $640,068 and Perth, up 1.8 per cent to $612,348, failed to break records.
Domain chief of research and economics Nicola Powell said the significance of the combined capitals’ median house price passing $1 million could not be understated.
“That million-dollar median is a real psychological barrier. The market is extremely challenging, there’s no getting away from it,” Dr Powell said.
“People who don’t own a home yet are faced with such dramatic rises in prices in such a short time [and] at a time when rents are also rising. Wages growth does not keep up with that.
“If you don’t own a home, if you’re a parent, how on earth will they ever afford it?
“If having the stratified median national house price pass $1 million doesn’t put housing affordability on the agenda for the government, I don’t know what will.”
Prices were unlikely to have hit their peak yet, Dr Powell said, although weaknesses were emerging in Sydney’s and Melbourne’s markets, as well as signs that the pace of growth was slowing down elsewhere.
“We haven’t reached peak prices yet. Overall, they’re likely to still go up from here but not by as much. It’s more about that wave of growth, that really super strong momentum we saw … that’s what has peaked,” she said.
Sydney’s median house price rose roughly $1100 a day over 2021 for a total rise of almost $400,000 and the steepest annual rate of growth on record: the median jumped 33.1 per cent in the space of just 12 months.
The median unit price hit a record high of $802,255 after gaining almost $62,000 over 2021, or 8.3 per cent.
The median house price in Melbourne saw its strongest annual gain since 2010, rising 18.6 per cent, equating to a rise of $660 a day over the quarter – the steepest dollar increase on record for a single quarter.
The unit median price increased 3.9 per cent over the quarter to a new record high of $593,387, the strongest quarterly gain in two years.
But that rapid escalation in prices was proving to be a significant financial barrier for entry buyers and upgraders against the backdrop of low wage growth, Dr Powell said, and was already taking effect in Sydney and Melbourne, pointing to a slowdown in growth.
“There is a waning demand playing out across a number of metrics – clearance rates in Sydney have dipped from 81 per cent in the March quarter to 68 per cent in the December quarter and prospective buyer inquiries have dropped 20 per cent over the same period,” she said.
The supply of homes for sale had increased significantly, Dr Powell said, with Melbourne’s total supply now sitting 10 per cent above the five-year average and Sydney on par with its five-year average.
“Conditions are improving for buyers and it’s a wake up call for sellers. In early 2021 sellers would’ve readjusted their prices upwards during the campaign, now they may have to adjust them downwards,” she said. “Buyers are astute and don’t want to overpay. They’re conscious we’re close to the peak.”
But it’s a very different story in Brisbane, Canberra and Adelaide, where there have been no signs of a slowdown in prices or momentum. In these capitals, supply is still extremely tight and demand is still extraordinarily high.
“In cities like Adelaide and Brisbane, prior to the pandemic there was a drain of residents but since the pandemic, they’ve seen a net gain of people choosing to live there. That changes the housing markets,” Dr Powell said.
“Greater Brisbane house prices have risen at their fastest pace in almost 18 years and are set to surpass $800,000 over the next quarter as momentum continues to build.
Significantly for Brisbane, its ailing unit market has turned around. After consecutive years of falling unit prices, the median unit price has grown by 2 per cent to a record high of $416,033, surpassing a previous record set in 2016.
“In Brisbane, buyer demand is still very high,” Dr Powell said. “Supply was 41 per cent below the five-year average for December, one of the deepest declines of all the capital cities.
“Inquiries from prospective buyers doubled over the December quarter compared to the same time the year prior and 26 per cent came from interstate.”
She said Adelaide’s lack of housing supply would see the momentum of growth continue.
“It’s seen a rate of growth it has never seen before, the steepest price rises on record,” Dr Powell said. “Adelaide has always been the quiet achiever, the steady performer, but when you look at its supply of property compared to the five-year average, again, it’s significantly below that.”
Although Hobart’s rate of growth eased slightly over the December quarter, cracking the $700,000 median house price was a significant milestone.
“You have to put everything into context. That median in Hobart is huge when you consider their wages. It’s extremely challenging,” she said.
Article Source: www.domain.com.au
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