Sydney house prices surged 12 per cent over the year to March before the virus lockdown, while Melbourne climbed 10.8 per cent, the Australian Bureau of Statistics residential price indexes show.
Most of the restrictions affecting the residential property market were put in place in late March, and therefore did not have a noticeable impact on prices in the March quarter.
House prices in Hobart jumped by 7 per cent, Canberra 3.5 per cent and Brisbane by 3.1 per cent.
The value of all dwellings in the March quarter rose by 8.7 per cent from a year ago – the strongest annual growth rate in 2½ years.
Over the three months to March, Sydney house prices rose by 2.6 per cent and Melbourne 2.3 per cent.
The total value of residential dwellings in Australia climbed to a record high $7237.1 billion in the March quarter, rising by $141.6 billion, or 2 per cent, during the quarter.
AMP Capital chief economist Shane Oliver said the numbers reflected the mini-boom that peaked in the December quarter, but even then, prices were starting to lose momentum.
“Price growth started to slow as we went through the March quarter, even though the coronavirus didn’t hit until the latter half of the month when the bans on on-site auctions and public open homes were imposed,” he said.
Dr Oliver said Sydney house prices were still on track to drop by 10 per cent on average this year, despite early signs of improving confidence.
The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.5 per cent – the 10th lift in 11 weeks. Sentiment has climbed by 49.3 per cent since hitting record lows of 65.3 points on March 29.
The CBA Household Spending Intentions Series found that home buying intention has stabilised in May, driven by an increase in mortgage applications as house prices fell.
“I think there’s more weakness ahead, particularly in the apartment sector,” Dr Oliver said.
“I think that the apartment market is at risk – and even more than the housing market – once the bank payment holiday comes to an end.
“The decline in immigration, which means weak underlying demand, the loss of income in the community – which could result in increase in mortgage defaults – and then the loss of rents for investors could combine to weaken prices this year.”
(Fin Review – June 20)
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