Home prices have started 2024 slowly, with prices flat in capital cities and up only slightly in regional areas.
PropTrack’s Home Price Index shows that national home prices increased only very slightly in January, up 0.02% to be 5.26% higher than a year earlier.
After reasonably strong growth in the middle of 2023, prices have started 2024 more slowly, and momentum in prices has faded.
Strained affordability – which sits at its worst level in at least 30 years – is likely weighing on prices, made more challenging by the additional rate rise in November last year.
On the other hand, the likelihood of a more stable interest rate environment in 2024, coupled with ongoing population growth and a low level of new building activity, will provide support for prices.
Download the PropTrack Home Price Index - January 2024 report in full
National home prices increased just 0.02% in January, a slower pace of growth than was the case in the middle of 2023, amid typically lighter sales volume in January due to the end-of-year break. Momentum in home prices has slowed from the middle of the year, and prices have now been essentially flat since October.
Both capital cities and regional areas saw prices largely stable in January.
Across the combined capital cities, prices were steady in January, following a very modest fall in December. That means that capital city prices have been essentially flat since October – a clear slowing in momentum from the pace of growth seen in the middle of 2023.
Regional areas saw very modest growth of 0.06% in January. While regional areas have very slightly outpaced capital cities over the past few months, capital city areas remain the stronger performer over the past year and a bit.
Prices were fairly stable in most capital cities in January, amid the typical quieter sales volume we see in January due to the end of year break.
Prices fell very slightly in Sydney (-0.04%), Melbourne (-0.09%), Adelaide (-0.13%), and Canberra (-0.23%), while they grew modestly in Hobart (0.09%) and Brisbane (0.17%).
Perth was the only capital city to record a notable change in prices, posting fairly strong growth of 0.5% in January, to be 15.45% higher than a year ago. Perth was the strongest performing market in 2023, and that strength looks to have continued in to the start of 2024. Supporting home prices, buyers in Perth are facing record-low choice. While affordability has declined significantly as interest rates have risen, WA remains the most affordable state across Australia, which is likely supporting prices as well.
Brisbane and Adelaide have also both been strong-performing markets, though both were softer in January – particularly Adelaide, which recorded its first monthly decline in prices since late 2022, though this was amid typically lighter sales volume in January due to the end of year break. Small decline in January notwithstanding, we expect Adelaide will continue its momentum from 2023 and be one of the stronger-performing cities, given its relative affordability.
At the other end, Melbourne saw home prices decline 0.09% in January, continuing the city’s fairly soft performance since spring. Unlike Sydney and Brisbane, both of which saw prices recover in 2023, home prices in Melbourne remain 4.71% below their pre-rate-rise March 2022 peak. Buyers in Melbourne have been enjoying more choice than has been true in many other parts of the country, with the total number of properties listed for sale sitting above the decade average since mid-winter. Similarly, while prices increased slightly in Hobart in January, prices in Hobart have been trending downwards for two years amid extremely strained affordability after surging prices during the pandemic (and prior).
Prices for detached houses (+0.03%) slightly outperformed prices for units (-0.07%) in January, though both saw only very small changes in prices from December. That mild outperformance continues the trend across much of the past year, with detached house prices up 5.4% nationally, compared to 4.3% for units.
WA regions account for six of the top 10 fastest growing regions in the past year, with Northern Adelaide and parts of southern and western Brisbane making the remainder. Perth has been the strongest performing city – and indeed the strongest performing market overall – in the past year, and regional WA has been only just behind regional SA as the second-strongest regional market.
This outperformance has been driven by two factors: WA’s relative affordability, and a record-low stock of properties available for sale. While affordability has declined significantly as interest rates have risen, WA remains the most affordable state across Australia, a marked change from 15 years, amid the height of the mining boom, when WA was the least-affordable state.
Home prices were surprisingly resilient in 2023, defying expectations of a broader downturn. However, as we head in to 2024, there are headwinds for home prices. Interest rates were increased in November last year, further reducing how much prospective buyers can borrow. The rapid pace of interest rate increases has pushed housing affordability to its worst level in at least three decades, which will be a constraint for many buyers, and is a headwind for home prices.
Nonetheless, we expect prices in 2024 will still grow, albeit slowly. Markets are no longer expecting further increases in interest rates, and there is a reasonable prospect of interest rate declines later in the year, if inflation falls to be more in line with the RBA’s target.
In addition, population is growing strongly, wages are growing, and the unemployment rate remains at very low levels, all of which is driving fundamental demand for housing. At the same time, new building activity remains sluggish, with the number of dwellings starting construction sitting around its lowest level in a decade.
Those factors should support home prices in 2024, and lead to positive, albeit, slow growth in most markets.
Methodology: The PropTrack Home Price Index measures the monthly change in residential property prices across Australia to provide a current view on property market performance and trends. PropTrack Home Price Index uses a hybrid methodology combining repeat sales with hedonic regression. The repeat sales method matches resales of the same property while the hedonic regression estimates values based on the value of similar properties. The hybrid model allows two properties in the same Australian Bureau of Statistics Statistical Area 1 (SA1) region, of the same type, to be matched and controls for differences in property characteristics, as in a hedonic regression. The PropTrack Home Price Index is a revisionary index with the whole back history updated monthly with current transaction information.
** This report uses realestate.com.au internal data and data sourced from third parties, including State government agencies. It is current as at the time of publication. This report provides general information only and is not intended to constitute any advice and should not be relied upon as doing so. If you wish to cite or refer to this report (or any findings or data contained in it) in any publication, please refer to the report as the ‘PropTrack Home Price Index Report – January 2024’. See report for Copyright and Legal Disclaimers.
