- Home prices in Australia increased by 1.6% in the first three months of 2024.
- The median dwelling price is currently at $772,730, a new record high, according to CoreLogic.
- All capitals except Darwin posted positive monthly movement.
- Melbourne was the only capital to record a negative quarterly movement at 0.2%.
- Perth remained the city with the fastest growth rate in home values.
- Home prices are expected to rise in the coming months amid expectations that the RBA will lower the cash rate.
The quarterly increase in the CoreLogic’s Home Value Index (HVI) was partly attributed to the 0.6% gain in March.
The monthly lift has brought the national median dwelling price to a new record high of $772,730, a 10.2% growth from the trough of January 2023.
As in previous indices, Perth continued to lead the charge with the fastest increase of 5.6% quarter-on-quarter on account of relative affordability compared to eastern capital cities.
The top-performing Western Australian capital is followed by Adelaide (up 3.3%) and Brisbane (up 3.0%).
Other capitals trailed behind with less than 1% quarterly gain – Sydney recorded a 0.9% increase, followed by Canberra at 0.8%, Darwin at 0.4%, and Hobart at 0.1%.
The modest 0.1% gain in February and the flat growth rate in March were not enough to pull Melbourne’s property prices up, making it the only capital city to record a negative quarterly movement of -0.2% in the first three months of the year.
The month-on-month change in dwelling values across capitals was relatively the same as the quarterly rate, except for Darwin’s 0.2% downturn.
Looking 12 months further, all markets experienced property price growth as homes across the nation now sell at 8.8% higher than a year ago.
However, only Perth, Brisbane, and Adelaide were the cities that posted a double-digit growth rate year-on-year.
Australian housing market demonstrates resilience
All these price surges materialised in the face of rising costs and high interest rates.
In the second of eight monetary policy meetings of the Reserve Bank of Australia (RBA) this year, the Board elected to once again leave the cash rate unchanged, which has been holding steady at 4.35% since November 2023.
Although this resulted in the cost of servicing a mortgage outpacing household income growth, the demand for homes Down Under has continued to drive prices up.
“Rate hikes, cost-of-living pressures, and worsening housing affordability are all factors that have contributed to softer housing conditions since mid-last year,” CoreLogic research director Tim Lawless said.
“However, an undersupply of housing relative to demand continues to keep upwards pressure on home values despite these headwinds.”
And since prices are soaring, the bulk of the demand has shifted towards entry-level housing.
Across the combined capital cities, cheaper homes, or those at the lower end of the market, increased in value at more than twice the rate of luxury houses; that's 3.1% versus 0.7%.
“With fewer buyers able to purchase a home at the median value, we could see demand deflecting towards lower price points, potentially favouring outer-fringe detached housing markets and the multi-unit sector where price points tend to be lower,” Mr Lawless said.
While Melbourne falls, Perth performs
Another notable trend in the property sector as of late is Melbourne’s stagnating housing market due to supply outweighing demand.
Despite the spike in gross rental yields (3.57%), surging rent prices (21.1%), and low vacancy rate pointing to huge demand, some of those looking for houses in the Victorian capital are not in a position to buy.
“A rise in rental yields alongside expectations that housing values could rise and rental markets remain tight for an extended period of time is likely to be seen as an attractive opportunity for investors,” Mr Lawless said.
“However, with investor mortgage rates averaging in the mid-6% range, it’s likely that most investors who are new to the market will be experiencing a cash flow loss unless they are able to stump up a sizeable deposit.”
While investors dither in Melbourne, homebuyers in Perth are snapping up houses left and right, propelling the market to outpace others with significant monthly and annual increases in prices.
“Despite such a rapid pace of capital gains, housing values remain relatively affordable [in Perth] compared with the larger capital cities,” Mr Lawless noted.
“Housing remains in short supply and purchasing demand is still high due to interstate and overseas migration rates that are well above average.”
The latest ABS population data revealed net overseas migration to WA was running well above average at 18,122 in the September quarter of 2023.
Unlike some of the states on the other hand, net interstate migration held well above the previous decade's average, reaching 2,237 in the quarter.
“The extreme flip in demographic trends has delivered a significant positive demand shock across WA housing,” Mr Lawless noted.
Will home values fall again?
Citing population growth and slow delivery of new builds, PropTrack senior economist Eleanor Creagh said, “The imbalance between supply and demand is likely to further offset the impact of affordability constraints and slowing economy.”
“As a result, prices are expected to remain on the rise in the months ahead.”
PropTrack’s Home Price Index, which also tracks dwelling values in Australia, likewise posted a monthly gain in March at 0.34% to bring its median price estimate at $768,000.
In addition to the supply and demand constraints, the widely expected RBA cash rate cut this year is seen to sustain the rise in dwelling values.
“The outlook for housing values remains positive amid a growing expectation that interest rates will start to fall later this year, providing a boost to borrowing capacity and consumer sentiment,” Mr Lawless said.
Photo by Max Vakhtbovcyn on Pexels
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