CoreLogic’s national Home Value Index (HVI) increased 0.6 per cent in March, marking the first month-on-month rise since April 2022.
The HVI had remained virtually flat in February, decreasing only 0.1 per cent.
The rise in home values was led by a 1.4 per cent gain in Sydney, followed by other capital cities and most of the broad ‘rest-of-state’ regions.
According to Tim Lawless, CoreLogic’s Research Director, the rise in housing values can be attributed to a combination of factors, including low advertised stock levels, extremely tight rental conditions, and additional demand from overseas migration.
While interest rates are high, Mr Lawless believes that other factors are now placing upwards pressure on home prices.
“With rental markets this tight, it’s likely we are seeing some spillover from renting into purchasing, although, with mortgage rates so high, not everyone who wants to buy will be able to qualify for a loan,” Mr Lawless said.
He also mentioned that with net overseas migration at record levels and rising, more permanent or long-term migrants who can afford to may fast-track purchasing a home simply because they cannot find rental accommodation.
The rise in housing values was most evident across the upper quartile of Sydney’s housing market.
House values within the most expensive quarter of Sydney’s market were up 2 per cent in March, while the upper quartile of the Sydney unit market was 1.4 per cent higher over the month.
Mr Lawless said that Sydney’s upper quartile house values had fallen 17.4 per cent from their peak in January 2022 to a recent low in January 2023, the largest drop from the market peak of any capital city market segment.
“We may be seeing some opportunistic buyers coming back into the market where prices have fallen the most,” he said.
Regional housing markets have also shown firmer housing conditions, with the combined regionals index rising 0.2 per cent over the month.
Housing values across Regional WA and Regional SA remain at cyclical highs despite 10 successive interest rate hikes.
South Australia’s Fleurieu-Kangaroo Island sub-region led capital gains over the month with a 2.6 per cent rise in dwelling values followed by Dubbo, NSW (2.5 per cent), Wellington, Victoria (2.4 per cent), and Mid West, WA (2.1 per cent).
Mr Lawless added that the best performing regional markets are quite different from what was seen through the recent growth cycle. “
In today’s market, it is mainly rural areas that are seeing the strongest increases, rather than the commutable coastal and lifestyle markets that were booming through the upswing,” he said.
“However, we are seeing some subtle growth return to regions within commuting distance of the major capitals, after many recorded a sharp drop in values.”
However, housing values are not rising everywhere.
Hobart recorded the largest drop in home values among the capital cities, down 0.9 per cent over the month.
Housing values across the southernmost capital have fallen 12.9 per cent since peaking in May last year, overtaking Sydney as the largest cumulative fall from peak across the capital cities.
The pace of decline has been easing across Hobart over the past three months.
Canberra ( down 0.5 per cent), Darwin (down 0.4 per cent), and Adelaide (down 0.1 per cent) also recorded a decline in values over the month, as did Regional Victoria (down 0.1 per cent) and Regional Tasmania (down 0.7 per cent).
Despite the declines in some regions, Mr Lawless believes that the Australian housing market remains relatively resilient.
“Overall, the housing market is showing some resilience to rising mortgage rates, tighter lending conditions, and ongoing lockdowns, although the pace of capital gains is expected to ease through 2023,” he said.
