National home price growth slowed at the end of 2023, however growth has accelerated with summer drawing to a close.
The PropTrack Home Price Index shows national home prices hit a new record high in February, lifting 0.45%, the largest monthly rise since October 2023. That brings prices up 0.82% so far this year and up 6.15% compared to a year ago, the fastest annual rise since July 2022.
2024 has kicked off busily and more homes have hit the market this year, giving buyers more choice. Demand has kept up with that increase, with many anticipating that interest rates will fall in in the second half of 2024, likely providing a positive tailwind for activity.
Auction volumes have also been consistently higher in the first two months of 2024 compared to the same period in 2023. Despite the uplift in auction volumes, auction clearance rates are higher reflecting the improvement in conditions amidst the stable interest rate environment.
Housing demand has been buoyed by population growth, tight rental markets, resilient labour market conditions and home equity gains. Meanwhile, the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing. These factors combined have supported prices.
National home prices increased 0.45% in February, the largest monthly rise since October 2023, marking a busy close to the summer selling season.
Despite the increase in new listings hitting the market, buyer demand has kept up.
After the pace of home price growth slowed amid the slowdown in sales through the holiday period, growth has accelerated again. Prices are now up 0.82% so far this year to sit 6.15% above February 2023 levels, marking the fastest annual rise since July 2022.
After growth slowed at the end of 2023 amid typically lighter sales volume through the holiday period, both the combined capital cities and regional areas saw the strongest pace of monthly growth since October 2023 in February.
Capital city markets led 2023’s price upturn while prices in regional areas were slower to recover. This trend has continued so far this year and although both the combined capital cities and regional areas saw prices lift in February, prices in the combined capital cities have outpaced regional areas year to date.
Home prices in the combined capital cities are up 0.88% year to date after climbing 0.48% in February to a fresh price peak, while prices in regional areas lifted 0.33% in February to also set a fresh record, now up 0.65% year to date and up 3.83% on February 2023 levels.
Prices rose in February in all capitals except Hobart (-0.12%).
Adelaide (+0.81%), Perth (+0.56%), Sydney (+0.55%) and Brisbane (+0.54%) had the strongest pace of growth, with Sydney seeing the largest monthly increase since August 2023, and prices in all four capitals setting fresh records.
Prices lifted 0.49% in Canberra and 0.28% in Melbourne, while Darwin also recorded modest growth of 0.08%.
The smaller capitals continue their streak of outperformance and Perth, Adelaide and Brisbane remaining the strongest markets over the past year with prices 16.32%, 12.76% and 12.16% above February 2023 levels respectively. Year to date these capitals are also the strongest with prices up 1.46% in Adelaide, 1.22% in Perth and 1.17% in Brisbane.
The relative affordability of these cities, population growth, and very tight rental markets are supporting home values, while low stock levels are intensifying competition amid strong buyer demand, resulting in a sellers’ market with home prices continuing to rise at a fast pace in 2024.
Buyers in Perth are facing record-low choice, which is supporting home prices. 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.
In Brisbane and Adelaide supply is also very limited, with the total number of properties listed for sale down more than 40% relative to the prior-decade average in January 2024. Both cities recorded declines in listings relative to a year ago.
In Sydney and Melbourne increasing confidence amongst sellers has seen the flow of new listings surge, improving choice for buyers. Melbourne and Sydney both experienced their busiest kick off in over a decade, with Melbourne (+27.8% year-on-year) having its most active January for new listings since 2008 and Sydney (+27.7% year-on-year) since 2011.
Sydney home prices lifted 0.55% in February to a fresh price peak. Despite the increase in new listings hitting the market in Sydney, buyer demand has kept up as the summer selling season draws to a close. After the pace of home price growth slowed amid the slowdown in sales through the holiday period, growth has reaccelerated with prices now up 1.00% year to date. However, home price growth remains slower than the pace seen in April and May last year during the nascent home price recovery.
Melbourne home prices lifted 0.28% in February bringing them up 0.38% so far this year and 1.33% above February 2023 levels. Even so, prices in Melbourne remain 3.87% below their peak in March 2022.
The price recovery in Melbourne is lagging Sydney, and Brisbane but remains ahead of Hobart and Canberra, with prices up 1.66% from their January 2023 low. Buyers in Melbourne have consistently enjoyed more choice relative to other markets with the total number of properties listed for sale sitting above the decade average since mid-winter.
At the other end of the spectrum prices in Hobart fell 0.12% in February and Hobart remains the weakest performing capital city market when comparing annual price growth and change from peak, (-2.26%), as well as the change from peak (-7.99%). However, this comes after several years of outperformance, as well as strong growth during the pandemic which has seen affordability deteriorate. Home prices in Hobart are still up 35.9% since March 2020.
House prices have grown more quickly than unit prices over the past year and are now 6.29% higher than a year ago, while unit prices are up 5.49% on their year ago levels.
This continues the trend seen throughout the pandemic – house values have experienced rapid growth up 42.6% on pre-pandemic levels, while the growth in unit values has been more moderate, up just 20.5% on pre-pandemic levels.
The growth in home values over the past few years has been a tale of a two-speed market. While houses typically command a premium over units — and over the long run houses tend to outperform units with respect to price growth — since the onset of the pandemic, house price outperformance reached historic extremes.
The impact of the pandemic on housing preferences played a part here.
Since the pandemic onset growth in house prices has outpaced units in 83 of the 88 SA4 regions, and because of the outperformance houses experienced through the pandemic, the relative value units offer has increased.
In February prices for detached houses nationally grew 0.38% in the month, while unit prices grew more than twice as fast at 0.80%.
This growth means the unit market has started 2024 on a stronger footing, with unit prices nationally up 1.26% year to date compared with house price growth of 0.73%.
Housing affordability has deteriorated significantly as interest rates have risen and the apartment market offers a relative discount.
Strong demand for inner-city living post-pandemic, coupled with the rapid rate of population growth and housing supply constraints alongside the relative value units offer are likely buoying buyer demand and pricing in the apartment market.
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 up 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.
These markets have outperformed due to a combination of factors: more affordable homes, population growth, and – particularly for Perth – record low stock on market.
Home prices in 2023 remained resilient to the higher interest rate environment and the improvement in conditions that materialised through 2023 has continued in 2024.
2024 has kicked off busily and more homes have hit the market this year in Sydney and Melbourne, giving buyers more choice. Demand has kept up with that increase, with many anticipating that interest rates will fall in in the second half of 2024 likely providing a positive tailwind for activity.
Choice for buyers remains much more limited in Brisbane, Adelaide, and Perth.
After the pace of home price growth slowed toward the end of 2023 amid the slowdown in sales through the holiday period, growth has reaccelerated and despite the increase in new listings hitting the market in some regions, buyer demand has kept up as the summer selling season draws to a close.
Conditions remain robust and auction clearance rates have remained firm over the first two months of 2024, despite auction volumes remaining consistently higher than levels seen in the same period in 2023.
Housing demand buoyed by population growth, tight rental markets, resilient labour market conditions and home equity gains also remain in play, alongside the stable interest rate environment.
Australia’s population is experiencing rapid growth which is driving up the need for more housing. Meanwhile, the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing.
Higher interest rates and inflation are squeezing budgets, but despite the challenges households are facing, property prices are expected to remain resilient in 2024. Limited housing supply relative to demand is continuing to offset the substantial interest rate tightening delivered since May 2022 and deterioration in affordability.
Looking ahead, the positive tailwinds for housing demand and a slowdown in the completion of new homes are likely to offset the impact of reduced affordability and a slowing economy.
As a result, prices are expected to lift further in the months ahead, particularly while the expectation remains that interest rates will move lower in the second half of 2024.
Further, choice for buyers remains much more limited in Brisbane, Adelaide, and Perth, heightening competition, with limited housing supply relative to demand likely to see prices continuing to rise at a faster pace.
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 – November 2023’. See report for Copyright and Legal Disclaimers.
