House prices in Australia rose by nearly one quarter last year, the latest data shows.

And rents recorded their biggest twelve-month increase in thirteen years.

Releasing its December Home Value Index, real-estate information solutions provider CoreLogic said that average dwelling values across Australia rose by 1.0 percent in December to come in at $709,803.

As a result, dwelling prices recorded growth of 3.9 percent for the December quarter and 22.1 percent across 2021.

Regional markets led the way, with prices rising by 2.2 percent, 6.4 percent and 25.9 percent for the month, quarter and year respectively.

Particular strength was seen in the Southern Highlands and Shoalhaven in New South Wales (up 37.7 percent) along with the Sunshine Coast in Queensland (up 33.7 percent).

In major capitals, softer conditions are becoming evident in Melbourne, Sydney and Perth but momentum is gathering pace in Brisbane and Adelaide.

Meanwhile, rents increased by 9.4 percent over the calendar year.

This represents the fastest rate of rental price increase since the twelve months to January 2008.

In its report, CoreLogic says the current market upturn is being driven by strong housing demand and constrained supply.

On demand, it noted that the volume of home sales which took place during the year exceeded ten-year averages to the tune of 40 percent.

This has taken place despite stock levels finishing the year at 24.7 percent below the five-year average.

Source: Corelogic

Price Growth to Ease in 2022

Going forward, CoreLogic expects that dwelling values will continue to rise in the short term but adds that the rate of increase will ease throughout 2022.

This will occur as strong listing activity in the back half of 2021 sees stock levels return to normal whilst demand eases on account of affordability constraints and tighter credit conditions.

Whilst border reopening will provide some demand support, the effect of this will be concentrated primarily in rental markets – particularly in inner city precincts which are popular with students and visitors.

CoreLogic also says that:

  • Housing affordability will again become an election issue as rising prices and low income growth have made it more difficult to raise a deposit and fund transactional costs such as stamp duty.
  • COVID remains the biggest wildcard as any return to restrictive policies that prohibit movements or home inspections could disrupt transaction activity but may also help to prolong expansive monetary policy.
  • Further downside risks include an early lift in interest rates and/or tighter credit policies – either of which would impact purchasing activity by affecting the cost and/or availability of debt.