Home prices rise at fastest pace since 1988
Home prices have exploded over the past month, soaring at the fastest rate in 32 years.
Research group CoreLogic reported the national home value index increased 2.8 per cent over March, the highest monthly increase since October 1988.
The rises were even higher in Sydney, which had the country's biggest monthly surge in home values at 3.7 per cent.
It came off the back of already incredible growth in prices over previous months, with Sydney values now 6.7 per cent higher than at the end of December.
The median price of Harbour City property, based on sales of townhouses, units and houses, is currently $928,000 - a record high and well above the previous market peak in 2017.
Record price rises were fuelled by a mix of buyers capitalising on low interest rates and pent up demand from those who sat out the market during the early pandemic last year, CoreLogic noted.
There was also an increase in buyers seeking bigger homes after earlier lockdowns and prices for freestanding houses - especially at the premium end of the market - were growing considerably faster than units.
CoreLogic head of research Tim Lawless said buyer demand heavily outweighed the supply of available housing in both Sydney and the rest of the country.
This was despite a recent increase in the volume of homeowners taking their properties to market, he said.
"For every new listing added to the market, 1.1 homes are sold," he said. "Such a rapid rate of absorption is keeping overall inventory levels low and adding to a sense of FOMO among buyers."
Mr Lawless said housing values could continue rising throughout 2021 and into next year but the rate of increase could slow.
Earlier periods of rapid growth in prices have often been quelled by factors such as rising interest rates, weaker economic conditions or changes to lending standards, he said.
In mid-2015, the last time Sydney prices grew at a level close to what was seen over the past three months, financial regulators intervened with credit restrictions to put help cool the market.
And in the late 1980s, a run of price booms ended after a series of interest rate rises that pushed lending rates to a high of 17 per cent.
Despite the experience of previous market booms, banks have predicted more price growth could be on the cards.
ANZ last month forecast Sydney house prices could soar by double digit margins this year across our capital cities.
The bank predicted a rise of 17 per cent for the year, modifying an early forecast of 9 per cent growth in prices.
In February, Westpac predicted a 20 per cent jump in Australian property prices between now and 2023, while CBA's expectation was for 16 per cent growth in the next two years.
Propertybuyer.com.au CEO Rich Harvey said buyers needed to re-evaluate their budgets and prepare to spend a lot more than they would have last year or even earlier this year.
"The whole market is resetting its value expectations," he said.
"Neighbours are seeing what properties near them sell for and raising their expectation all the time. Buyers need to prepare for that."
Freestanding houses were particularly difficult to buy in the current market given they were the most sought after properties and supply was the most constrained, Mr Harvey said.
"The demand is up and the supply is down," he said.
"A lot of buyers are living in units and sick of the lack of space. After being in lockdown, they're saying 'I want a larger place and I will pay whatever it takes to get it. I deserve it.' "
McGrath-Coogee agent Nicholas Wise last week sold a Clovelly house for $4.26 million, about $850,000 over reserve, and said there was a genuine fear guiding buyer spending.
"No one wants to miss out before prices rise further," he said. "The market is more competitive than I've ever seen. It's hard to know how this is going to end."
Mr Harvey added first-time buyers should avoid the temptation to throw their arms up in frustration and call it a day.
"Hang in there, keep saving, keep at it," he said. "There are still bargains out there, especially if you are looking for an apartment rather than a freestanding house."
Originally published as Home prices rise at fastest pace since 1988