According to Domain's quarterly House Price
report, the average price for a house in Australia was just over $850,000 based
on results from the December quarter. This was a sharp 4.1% jump during the
three month period, and a healthy 5.8% rise in a year defined by a global
pandemic. Every capital city except Darwin and Perth reached record levels,
with buyers flooding the market in the last few months of 2020 since the end of
the major lockdown period.
Sydney remains the most expensive market to
buy a house at $1.2 million, followed by Melbourne at $936,073, Canberra at
$855,530, Brisbane at $616,387, and Adelaide $574,264. Prices in Hobart were
$564,091 at a record 12.4% year-on-year increase, with Perth values at
$563,214, and Darwin at $533,845. At $852,940, the average national house price
in December was much higher than the $819,112 value recorded in September,
2020; and the $806,360 value recorded in December 2019.
According to Domain's Senior Research
Analyst Dr Nicola Powell, there was a stark difference between house and
apartment prices, with the value of houses jumping exponentially and the value
of units rising much more modestly: "National house prices reached a
record high at the end of 2020... National unit prices increased a more modest
1.3 per cent over the December quarter to $574,245 and now are only 1.4 per
cent below the mid-2017 peak and could surpass this high over the next
quarter."
Despite record high prices, house values
could rise much further in the months and years ahead. The current low interest
rate environment is the key, with the RBA's quantitative easing program also
continuing to lower borrowing costs. The bank has cut official interest rates
by 1.15 percentage points since June, 2020, dropping from 1.25% to 1.0% in July
before dropping time and time again to its current rate just above zero.
According to recent analysis by the RBA,
house values could jump by a massive 30% over three years if borrowers believe
the cut in interest rates is permanent. Instead, if people believe that
ultra-low interest rates will remain on a temporary basis, real house prices
are likely to rise by a much lower 10%. RBA governor Philip Lowe has already
said that he does not expect the 0.1% cash rate to increase for "at
least" three years.
According to Dr Powell, current conditions
are likely to continue throughout 2021, with low rates likely to fuel further
price rises in the years ahead: “The year 2020 ended with so many new records;
the resilience of our market is pretty remarkable... With the historically low
interest rates likely to stay for the near future, we’d expect this level of
activity to continue, so we’ll see more price growth throughout 2021."