National home prices fell in January, as the softer end to 2024 carried over into the new year.
While housing demand remained resilient to persistent affordability constraints, the pace of home price growth slowed throughout 2024, culminating in small falls over the past two months.
This softening in growth has occurred alongside a surge in stock for sale, giving buyers more choice and reducing the urgency to transact.
•National home prices fell 0.08% in January, though remain 3.82% higher year-on-year.
•Capital cities led the decline in prices, falling 0.16% in January. In contrast, regional areas recorded a 0.12% rise in prices over the month.
•Hobart (-0.46%), Melbourne (-0.30%), and Sydney (-0.21%) led price falls in January, with prices also dropping in Darwin (-0.11%), Canberra (-0.10%) and Adelaide (-0.07%) over the month.
•Prices in Perth were flat in January, remaining at peak levels. Meanwhile, Adelaide recorded a small fall (-0.07%) in January, bringing prices 0.27% below their peak.
•Brisbane was the only capital to see price rises in January, lifting 0.08% over the month.
•Perth (+15.38%), Adelaide (+12.41%) and Brisbane (+10.44%) remain the strongest performing capitals over the past year. However, the pace of growth has slowed in recent months.
•Annual price growth in regional areas (+4.47%) outpaced the capital cities (+3.56%) in January as poor affordability and a surge in choice through spring tempered price growth in the capitals.
•Despite the recent downturn, national home prices have risen over the past year, and compared to March 2020, national home values are 45.0% higher.
Affordability, weaker economic conditions and the sustained higher interest rate environment have also been contributors to slowing – and reversing –growth.
With interest rate cuts on the horizon, the price falls seen over the past two months are likely to be short lived.
As interest rates move lower this year boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth.
However, the stretched starting point for affordability will likely dampen the uplift in prices compared to prior easing cycles, resulting in the pace of home price growth trailing the strong performance of recent years.
Annual price growth in regional areas (+4.47%) outpaced the capital cities (+3.56%) in January as poor affordability and a surge in choice through spring tempered price growth in the capitals.
Capital cities led the decline in prices, falling 0.16% in January. In contrast, regional areas recorded a 0.12% rise in prices over the month.
All regional areas saw a lift home prices in January, except for regional Victoria where prices fell 0.15%. Regional Victoria (-2.28%) is also the only regional market to have recorded falls over the pat year.
Price momentum has been consistently weaker in Melbourne and Regional Victoria as buyers have consistently enjoyed more choice relative to other markets, higher property taxes and higher unemployment in Victoria have also played a role.
Increases in taxes on investment properties have made owning a rental property less attractive in Victoria, leading to uplift in the share of investors selling.
At the same time, in the past decade construction rates relative to population growth in Victoria have been more balanced compared to other parts of the country.
Nationally house prices fell 0.03% in January, while unit prices nationally fell 0.33%.
Despite the falls in January, national house prices have lifted 3.98% over the past year, marginally outpacing growth in unit values (3.12%). Though since the pandemic onset house values are up 50% vs. just 26% for units.
After a significant revaluation of space favouring house values since the onset of the pandemic, affordability pressures, as well as the rejuvenation of city living has left home price growth at the national level across property types broadly comparable over the past two years.
However, this trend differs across the capitals. In the past year house price growth (2.53%) has outpaced unit price growth (1.24%) in Sydney, the same is true in Canberra, though the opposite is true in Brisbane where unit prices have lifted 13.96% vs. 9.81% for houses in the same period.
Markets in Queensland, SA and WA continue to record strong growth.
Interest rates remain at high levels, and home prices have risen significantly in recent years whilst growth in household incomes has not kept up with these increases, as a result affordability has deteriorated to its worst on record.
Generally, across the capital cities more affordable regions have outperformed over the past year, with strength in homebuying demand buoyed in these regions as buyers push down the value chain.
And the more affordable regions within each city like Adelaide’s north, Ipswich, and Perth’s northwest and south have seen rapid price increases.
Though the pace of growth has slowed significantly over the past year, Perth remains the top performing capital for annual home price growth (+15.38%), with the comparative affordability of the city’s homes, strong population growth and limited new housing supply contributing to the persistently strong growth of recent years.
Low stock levels are also intensifying competition, tight supply amid strong buyer demand has fuelled competitive conditions and strong price growth in the past year.
Housing demand remained resilient, defying affordability constraints with prices lifting every capital city and regional area over the past year, apart from Melbourne and regional Victoria.
However, the pace of growth varied with differing supply and demand conditions driving the diverse performance across the country.
Australian home prices fell 0.08% in January, following on from slowing home price growth throughout 2024, which has culminated in small falls over the past two months.
An increase in stock for sale, poor affordability, weaker economic conditions, and the sustained higher interest rate environment have all been contributors to slowing – and now reversing – home price growth.
With interest rate cuts on the horizon, the price falls seen over the past two months are likely to be short lived.
As interest rates move lower this year boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth.
Meanwhile, building activity remains challenged, despite completions moving higher and building approvals stabilising, meaning a chronic shortage of housing remains.
However, the stretched starting point for affordability will likely dampen the uplift in prices compared to prior easing cycles, resulting in the pace of home price growth trailing the strong performance of recent years.
* 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 – July 2024’. See report for Copyright and Legal Disclaimers.
