Australia's housing values surged 16.1% annually, but monthly growth was already easing.
The property market July 2021 data confirmed a remarkable run of growth that was beginning to lose speed. Housing values rose 1.6% in July, taking the annual pace of growth to 16.1%. That was the fastest year-on-year gain since February 2004, and the first seven months of 2021 alone saw values climb 14.1%.
But the monthly story told a different tale. Growth had peaked at 2.8% in March and had been tapering steadily since. Lockdowns in Sydney and Melbourne were starting to dampen buyer activity and reduce the number of properties listed for sale.
July 2021 snapshot
National values rose 1.6% in July and 16.1% over the prior 12 months. The upper quartile of the market, the most expensive properties, was leading growth but also showing the sharpest slowdown. The top quartile rose 7.8% over the three months to July 2021, down 1.4 percentage points from its April peak.
Auction clearance rates held around 70% across major markets, but buyers and sellers were shifting toward private treaty sales. Auctions became difficult to conduct during lockdown, and many vendors chose to avoid them entirely.
Active property listings were 26% below the five-year average nationally. Demand was strong, but supply could not keep pace. Even with lockdowns reducing transaction activity, prices remained resilient because so few properties were available to buy.
Why growth was easing
The pace of growth had been tapering since April 2021. Housing values were rising faster each month than wages were growing, creating a widening affordability gap. Many potential buyers simply could not save deposits fast enough to keep up with escalating prices.
Sydney experienced the sharpest slowdown of any capital city. Monthly growth fell from 3.7% in March 2021 to 2% in July 2021. The lockdown weighed heavily on consumer confidence, and active listings in Sydney fell by at least 30% between mid-July weeks.
Melbourne also saw listings fall 27% over the same period. With fewer properties available and lockdown uncertainty clouding buyer decisions, the usual volume of transactions slowed significantly. Despite lower supply, weaker confidence suppressed buyer activity more broadly.
Houses vs units
The gap between house and unit performance widened significantly through 2021. Over the 12 months to July, national house values rose 18.4% compared with just 8.7% for units. The pandemic-driven preference for space, outdoor areas and home offices kept demand for houses elevated.
This trend held across almost every capital city. The one exception was Hobart, where unit values rose 23% compared with 21.7% for houses. In all other capitals, houses outperformed units by a wide margin.
For investors weighing up their options, this divergence had practical implications. Cities with higher unit yields such as Darwin and Perth were attracting investor interest. If you want to explore which markets offer the best returns, our guide to positive cashflow properties in Australia covers the locations where rental income is most likely to cover your costs.
Rental market update
National rents rose 7.7% annually in July 2021, the fastest pace of appreciation since 2008. The rental market split sharply by city. Darwin and Perth had the tightest rental conditions, driven by low vacancy rates and strong local demand.
Sydney and Melbourne continued to stabilise after a difficult period. High vacancy rates, caused by stalled migration and a shift away from high-density living during the pandemic, had pushed down rents in inner-city areas. But those vacancy rates were beginning to improve as local demand recovered.
Gross rental yields fell to a record low national average of 3.4%. Sydney’s gross yield dropped to 2.5% and Melbourne’s to 2.8%. Other capitals including Brisbane, Adelaide and Canberra all maintained yields above 4%, making them more attractive for investors seeking better rental income. Use our borrowing power calculator to see how much you could borrow to purchase an investment property.
Buy now or wait?
The best time to buy property is when your personal circumstances support it. If your employment is stable, your deposit is ready and you understand what you can borrow, waiting for a perfect moment often costs more than it saves.
Buyers in mid-2021 adapted to lockdown conditions by using online auctions, virtual property inspections and digital mortgage applications. The market kept moving even when physical movement was restricted. History had also shown that circuit-breaker lockdowns typically released pent-up demand once restrictions lifted.
For context on how the market evolved after July 2021, check out the August 2021 property market update, which covers the continued lockdown impact and the resilience of values despite reduced transaction volumes.
Common questions
Q: How much did property values grow in July 2021?
National housing values rose 1.6% in July 2021, taking the annual pace of growth to 16.1%. That was the fastest year-on-year increase since February 2004. However, the monthly pace had been slowing since March 2021, when it peaked at 2.8%.
Q: How did lockdowns affect the property market in July 2021?
Lockdowns in Sydney and Melbourne significantly reduced property listings. Active listings in Sydney fell by at least 30% and Melbourne by 27% between mid-July weeks. Consumer sentiment was dented, but demand remained firm. Previous circuit-breaker lockdowns had generally released pent-up demand once restrictions lifted.
Q: Were houses a better investment than units in 2021?
House values significantly outperformed unit values. Nationally, houses rose 18.4% over the 12 months to July 2021, compared with 8.7% for units. The pandemic-driven preference for space and outdoor areas drove this divergence. Hobart was the only major city where units outperformed houses.