- One might expect lower priced properties to rise during booms, but this is not the case
- The higher priced properties rose the most during 2021 so far, suggests CoreLogic research
- Cheaper properties keep their value in a downturn, but are less likely to rise most during peaks
When house prices start to take off, one would imagine the cheaper areas and lower-priced properties would be the first to move. The theory goes that this increased activity would work its way up the market, finally raising prices at the top end.
Not so, says CoreLogic’s research, which has data to show that properties in the top price bracket are rising the fastest at the moment.
In February 2021, those properties in the top price quartile (above $960K, and typically $1.2M or more) rose 2.7%. In a month.
This was in contrast to mid-tier growth of 1.5% and low end (properties under $497K) of 1.2%.
In addition, the price rises at the top end are accelerating. In January, they rose by 0.5%, so the luxury market is only getting stronger.
Part of the reason for this perhaps lies in what happened in the immediate past. The top end was the one most depressed during the past 12 months.
Over the 2020 year, the highest priced (top 25%) capital city properties saw their values fall 4.3%, compared to only a 1.6% fall in the mid-tier, and 1.6% at the low end.
The snapback in prices, maybe part relief, has been strong, and understandable. Interest rates are low, set to remain so, the economy has not collapsed, unemployment has fallen, businesses (in the main) are doing relatively well.
This all breeds underlying confidence and allows people to make decisions. High-end property is not something done on a whim, so with more certainty returning to the market, so follows property transactions.
Sydney, Melbourne, Brisbane and Canberra are leading the high-end property price increases.
“In Melbourne, the lifestyle market of the Mornington Peninsula, which proved popular during COVID-19, is still leading quarterly growth at 7.9% in the three months to February.
However, growth rates have been rising across the expensive Inner East of Melbourne, which was up 2.5% in the month of February,” said Corelogic’s Head Of Residential Research Australia, Eliza Owen.
“… This has [also] been reflected in the change in values across the Northern Beaches of Sydney, a relatively high-end market which increased 6.4% in value in the three months to February. This was followed by a 5.3% increase across the Baulkham Hills and Hawkesbury region.”
In fact, this is fairly normal. Evidence has shown that lower-priced properties take off the least during boom times, as in downtimes the top end falls most. Conversely, the lower end tends to hold its value more as the rest of the market is depressed.
“Looking at long term annualised growth rates of values within the capital cities suggests 10-year annualised growth is fairly uniform across the different value segments.
“Over the course of 2021, the middle and lower value segments of the market are likely to follow the same trend as the high end, though growth rates are not expected to be as strong,” said Ms Owen.