House Price Growth Exceeds Wages
The Australian economy continues to feel the effects of COVID-19, with the virus and virus response likely to affect every aspect of the economy for years to come. While far from immune, the housing market has been fairly strong in the face of very significant challenges. According to recent data, house prices have outperformed wages over the past financial year due to a weak labour market and better than expected property prices. While this is good news for many property owners, it does put home ownership further out of reach for some.
According to data from Domain, house prices have been stronger than wages growth in every capital city but two over the last year. Despite the very real impact of the pandemic on dwelling prices, the impact of COVID-19 on employment and wages has been even more pronounced. Overall, national wage growth was just 1.7% in the year ending June, with house price growth up 6.6% leading to a discrepancy of 4.8%. According to Domain senior research analyst Nicola Powell, “Overall for Australia, wages growth has hit the lowest rate in 23 years.”
Once again, national property data highlights the very different markets of Australia. Sydney house prices finished the financial year 10.5% higher than the previous year, but NSW wages were up just 1.8% leading to a huge discrepancy of 8.7%. Melbourne house prices were 6.9% higher in June than a year ago, with Victorian wages also growing by 1.8% for a discrepancy of 5.1%. Reasonably strong economic conditions in Victoria earlier this year paint a somewhat unrealistic picture, however, as the prolonged lockdown in Melbourne continues to put significant pressure on house price growth.
The strongest property growth figures were recorded in Hobart and Canberra at 10% and 9.3%, with wage growth of 2.4% and 2.0% leading to a comparable discrepancy of 7.6% and 7.3%. The situation was similar across much of the country, with Perth and Darwin the only state capitals to record positive wage growth compared to house prices at 3.1% and 2.4% respectively. The counter trend witnessed in Perth and Darwin could spread nationwide over coming months, however, with house prices continuing to fall as hourly wages hold flat.
Sydney house prices fell 2% in the June quarter while wages held flat, and Melbourne house prices dropped by 3.5% in similar labour market conditions. According to Dr. Powell, with “what we have picked up in the COVID quarter, all cities over that quarter we’re seeing wage outpace price apart from Hobart and Canberra.” While it may take a little while for these results to emerge in annual figures, house prices continue to drop in Australia's biggest markets.
According to separate figures from CoreLogic, house prices in Melbourne have dropped by almost $30,000 over recent months. The median value of a Melbourne property now sits at $667,520, marking a 1.2% drop in August and $28,000 decline over the course of the pandemic. The situation in Sydney is not nearly as pronounced, with the NSW capital down 0.5% in August to a median value of $860,182. Brisbane was the only other state capital to record negative growth in August, dropping 0.1% to $503,128. Nationally, Australia's median dwelling value dropped 0.4% during August to $552,689.