New data out every month is showing property price growth in most big and small regions of Australia.
According to the latest CoreLogic Home Value Index, Australian home values surged 2.1 per cent higher in February – the largest month-on-month change in its national index since August 2003.
Spurred on by a combination of record low mortgage rates, improving economic conditions, government incentives and low advertised supply levels, Australia’s housing market is in the midst of a broad-based boom, the report even said.
Dig a little deeper and the results are more spectacular still, with dwelling values up significantly over the past year in smaller capital cities like Brisbane and Adelaide and in major regional areas across the land.
From those ridiculous “forecasts” of property prices plummeting at the start of the pandemic, to today where markets are strengthening faster than in nearly two decades – who would have thought?
Well, we did, as history had shown us how property markets had performed during previous economic downturns and recessions.
In previous moments of economic shocks, our government and central bank have always instigated policies to protect the wealth of their population, which is predominantly held in housing.
This has usually included the drastic reduction in interest rates to not only lower mortgage repayments to stimulate economic activity via property markets at the same time.
Prices on the rise almost everywhere
Of course, this is where we are again, with an almost sanctioned property boom happening more places than they are not.
Even locations like Darwin, which have been woeful for a long while, are seeing their markets rebound in a big way.
The million-dollar question now, of course, is how high can property prices go?
Honestly, no one really knows at this point in time, and if someone says they do they are probably not being entirely truthful.
Sure, economists have turned their previous forecasts from last year upside down and are now suggesting price growth of about 10 per cent per year for the next two years, depending on the location.
We believe they are not far off the mark this time around – versus their alarmist thinking last year.
A big part of why property prices are set to strengthen for some time is interest rates.
The Reserve Bank of Australia has been very open about its intention to not touch the cash rate until about 2024 – that is three years away.
The RBA says that until inflation is back somewhere near its target band of two to three per cent, then the cash rate isn’t going anywhere.
This sort of signposting is unusually frank from the central bank but is perhaps a strategy to encourage people to go and spend their money – on property or anything at all – to stimulate the economy.
So, with cost of borrowings remaining historically low for the next few years, rising property prices likely have a far distance yet to travel if you ask me.
Savvy investors and homebuyers would be wise to not sit on the sidelines.