_Australian residential prices perform better than expected

Australia ranked 19th globally for annual price growth in Q2 2020 with growth of 6.1%. Part of this was due to Australia’s rapid response in dealing with the COVID-19 pandemic ahead of other countries. Another part being attributed to the pent-up demand and low housing stock levels prior to the pandemic.

The uncertainty building around the withdrawal of economic stimulus, mortgage holidays and closed borders on population growth still lies ahead. In saying this, the Australian housing market has performed remarkably better than many would have expected in the second quarter of 2020.

This is leading to the likelihood of a market recovery in the second half of 2021.

Key Drivers

Australia’s economy fell by 6.3% in 2019-20, with the unemployment rate at 7.4% in June 2020 (ABS). The official cash rate target was 0.25% on 1 September 2020.

In the June 2020 quarter, average mortgage lending rates to owner occupiers fell by 153 bps to 2.35% for a 3-year fixed term loan, and was down 63 bps to 4.52% for a standard variable loan. By comparison, for investors, a 3-year fixed term fell by 141 bps to 2.71% and a standard variable loan was down by 63 bps to 5.10% (RBA).

New household loan commitments were down 11.0% in Q2 2020 across Australia, and residential building approvals were down 2.3%; when compared to Q1 2020 (ABS).

The weighted average total residential vacancy for Australian capital cities was last recorded at 3.0% in June 2020; up 50 bps over the past quarter (REIA).

Houses

Median house values across Australia rose 6.6% in the year ending June 2020 (down 2.0% in the last quarter) to $804,500. There were 49,745 house sales across Australia in the June 2020 quarter, falling 30.9% on the previous quarter.

Gross rental yields rose 2 bps in the second quarter of 2020 with Australian houses averaging 4.12%. Median house rents across Australia remained steady in Q2 2020 at $420 per week (APM).

Apartments

Median apartment values across Australia rose 4.5% in the year ending June 2020 (down 2.2% in the last quarter) to $561,000. Across Australia, there were 14,072 apartment sales in the June 2020 quarter, falling 42% on the previous quarter.

In the second quarter of 2020, gross rental yields fell 20 bps with Australian apartments averaging 4.18%. Across Australia, median apartment rents fell by 1.8% in Q2 2020, to $430 per week (APM).

How did each city perform? Read our latest Australian Residential Review here.