RESIDENTIAL MARKETS INVESTORS ENJOY MAJOR GAINS ON AUSTRALIAN, US AND UK PROPERTY
All three countries saw significant jumps in valuations in 2021, particularly in more rural areas, as buyers look to escape big cities for quieter, more secluded spots, writes Peta Tomlinson
For those building wealth through property investment, 2021 was a good year, with record-breaking price gains in certain markets. On the other hand, would-be buyers watched in dismay as prices outpaced their savings, pushing the dream of home ownership further away.
Taking the cake for all-round gains was Australia, where home prices finished the year 23.4 per cent higher than at the start – the highest jump in two decades, according to the Real Estate Institute of Australia (REIA).
REIA president Adrian Kelly said this is the first time since June 2002 the annual increase has been above 20 per cent.
“At A$1,499,126 [HK$8.4 million], Sydney’s median house price continues to be the highest among the [state] capital cities, 55.9 per cent higher than the national average,” he said.
Perth’s median, at A$520,000, is the lowest, coming in 45.9 per cent below the national average.
Price records were smashed despite a sharp slowdown experienced in both Melbourne and Sydney as the year drew to a close. In December, Melbourne house prices fell by 0.1 per cent – the first month-on-month fall since October 2020, according to CoreLogic – while Sydney had a small increase of just 0.3 per cent.
Tim Lawless, CoreLogic’s research director, cites a surge in new listings through December for taking some heat out of the Melbourne and Sydney housing markets, along with demand headwinds caused by significant affordability constraints.
“We have seen this trend in previous growth cycles, where more expensive housing markets have shown greater levels of volatility. Housing values tend to rise more through the upswing but record a larger decline through the down phase of the cycle,” he said.
It’s a different story in
Queensland, where pandemicrelated interstate migration pushed prices on the Sunshine Coast up by 33.7 per cent, and as much as 38 per cent in some Gold Coast suburbs.
Indeed, regional markets including Queensland’s Gold and Sunshine coasts outperformed all state capitals, led by the Southern Highlands and Shoalhaven in New South Wales, where home values soared by 37.7 per cent.
Affordability is clearly a pull factor favouring regional markets, where housing values are up 32 per cent since March 2020, compared to the 20 per cent lift in values seen across the combined capitals.
The southern capitals’ loss is Queensland’s gain, with interstate migration to sunnier climes expected to continue to fuel a property boom there.
Noting a surge in departures following prolonged Covid-19 restrictions, the Centre for Population forecasts that Sydney will lose 38,000 residents in 2021-22, and Melbourne 32,000. Queensland, which avoided extended lockdowns and is historically a popular destination for interstate migrants, is forecast to continue to get the largest net interstate migration gains.
Real Estate Institute of Queensland CEO Antonia Mercorella predicts the state’s boom will continue.
“Given our state’s enviable lifestyle coupled with a sense of safety and relative freedoms during the pandemic, and of course our comparatively great affordability compared to our southern city counterparts … it’s no wonder that interstate migration to Queensland is at an almost 20-year high as southerners relocate here in droves,” she said.
CoreLogic’s Tim Lawless believes regional markets in general will benefit from the urban exodus.
“Inventory is low across regional Australia, with advertised stock levels finishing the year 35.9 per cent below the five-year average.
“This compares to combined capital cities seeing stock 14.2 per cent below the five-year average,” he said. “It is likely regional markets – especially those with lifestyle appeal – will continue to benefit as remote working policies are more normalised, and demand for holiday homes remains strong amid continued international border restrictions.”
However, as interest rates begin to bottom out and affordability constraints extend to regional markets, Lawless believes regional housing markets may also move into a downswing phase over the course of 2022.
Meanwhile, in the UK, an annual gain of 10.4 per cent marked the strongest growth in home prices since 2006.
Robert Gardner, chief economist, Nationwide Building Society, said the price of a typical UK home is now at a record high of £254,822 (HK$2.7 million), up £23,902 over the year – “the largest rise we’ve seen in a single year” in cash terms. “Prices are now 16 per cent higher than before the pandemic struck in early 2020,” he added.
Regional markets again outperformed the capital, with only London recording lower annual price growth in 2021 than in 2020 (4.2 per cent).
“The South West was the strongest performing English region, with annual price growth of 11.5 per cent, the largest calendar year increase in the region since 2004,” Gardner said.
This was closely followed by the Outer South East, incorporating cities such as Brighton, Southampton and Oxford, with an annual price increase of 11.3 per cent.
However, affordability remains challenging for “the typical buyer”, with more people priced out of the market or needing to borrow a greater multiple of their income to buy.
“Raising a deposit is still the biggest hurdle for most prospective buyers,” Gardner said. “A 20 per cent deposit in London is now nearly £88,000 (based on the average first-time buyer house price), 183 per cent of average annual gross income in the capital, up from 130 per cent of income in 2011. In cash terms this is around £36,000 higher than a decade ago.
“While all regions have seen an increase in their deposit requirements, the rises are much more pronounced for the South and Midlands.”
And in the US, according to CoreLogic, housing market appreciation in 2021 reached the highest level recorded in the 45-year history of the CoreLogic Home Price Index.
National home prices increased 18.1 per cent year-onyear in November, led by Arizona (28.6 per cent), Florida (25.8 per cent), Idaho (25.5 per cent), Nevada (24.1 per cent) and Tennessee (24.0 per cent). New York gained just 7.6 per cent.
Molly Boesel, principal economist for CoreLogic in the office of the chief economist, said that while for current homeowners price increases led to record levels of home equity, for potential buyers, appreciation posed affordability challenges.
“Though home price growth remains at historic highs, it is projected to slow over the next year,” she said.
“However, economic growth and inflation will most likely lead to increases in mortgage rates, which will further erode affordability.”