Australian home prices reached a new record high in September, with regions even recording double-digit growth this year.
Prices nationally have risen for nine consecutive months, climbing 0.35% in September and 4.31% year to date.
But it is capital city home prices that have taken the lead in 2023 after falling for much of 2022. Prices in the capitals are up 5.41% so far this year.
It’s no surprise when we drill down to the smaller geographical regions known as SA4s, the standouts so far this year are predominantly inner-city regions.
Looking at these smaller regions also gives an understanding of which markets are leading the recovery and where stronger housing demand is in play, as well as the varying conditions across different cities and property types.
After leading the downturn in 2022, the Sydney market has led the recovery.
House prices in the harbour city are up 7.93%, while units are up 5.24% year to date. Both house and unit prices have lifted across all greater Sydney regions so far this year.
In fact, four of the top 10 regions across the country where house prices have recorded the largest lift this year are in Sydney.
Of all the capitals, Perth has recorded the largest lift in house prices this year, climbing 8.39%. Perth’s South East region has seen particularly strong growth, with house prices lifting 10.27% year to date.
Perth and Adelaide bucked the falling trend altogether in 2022. Stronger growth has continued in both these capitals this year and they’re the strongest performing capital city markets comparing annual price growth.
Prices have risen 9.24% in Perth and 8.31% in Adelaide since September 2022 as buyers compete for limited options and affordability is less constrained.
Although Sydney led the turnaround, Brisbane prices were first to recover all of 2022’s price falls and return to peak. The apartment market is experiencing stronger growth with prices up 6.66% year to date, while house prices are up 6.43%.
Parts of Brisbane have seen a particularly strong uplift in prices this year, with houses in Brisbane’s South region and units in Logan – Beaudesert experiencing strong growth so far this year.
Regional Queensland has also been a stronger performing market, particularly for apartments. Unit prices in regional Queensland are up 5.94% so far this year, outperforming house price growth of 4.57%.
Unit price growth in both Brisbane and Regional Queensland is not only outperforming house price growth in Brisbane and Regional Queensland, but also outperforming unit price growth in all other capital cities and rest of state areas.
Six out the top 10 regions where unit prices have recorded the largest lift year to date are in Queensland.
These regions have experienced stronger price growth for a number of reasons.
In Sydney a strong rebound in population growth with higher numbers of net overseas arrivals is likely to have bolstered demand for housing.
Meanwhile, Perth, Adelaide and South East Queensland regions have likely been buoyed by their relative affordability, population growth and interstate migration. Queensland and WA continue to attract the most interstate migrants, likely contributing to increased demand for housing.
One driver of the recovery in home prices this year has been the subdued listings environment that meant buyers were competing for fewer properties. But home prices have also been underpinned by record levels of net overseas migration, a challenged rental market and a new housing shortfall.
Home price growth has not only turned around quicker than many expected, but 2023 is shaping up be a historically strong year in many markets.
The Reserve Bank held interest rates steady for the fourth consecutive month in October. Unless there is a shift in the disinflationary outlook, it’s likely the peak in the cash rate is already here for this monetary policy tightening cycle.
Meanwhile the spring selling season experienced a busy start in September, buyer and seller confidence is on the up and choice is improving significantly in the major capitals.
Despite the uplift in the number of properties coming to market, housing demand is stronger, bolstered by the strength in net overseas migration, as well as very tight rental markets.
The unemployment rate is close to a multi-decade low and wages growth, while running behind inflation, has increased. Meanwhile, the increased likelihood that interest rates have peaked has reduced uncertainty around borrowing capacities and mortgage servicing costs.
Many buyers and sellers anchor expectations from recent momentum, which can embed trends in the market.
Nine months of price rises that have gathered traction across markets alongside more positive market conditions are likely to be drawing buyers off the sidelines and driving up competition and prices.
As the recovery has broadened, numerous metrics are reflecting the improvement in conditions. Sales volumes have increased, auction activity has strengthened and auction clearance rates are holding firm.
Looking ahead, population growth is rebounding strongly and, given the shortage of new homes, prices are expected to rise with more markets reclaiming peak levels after recouping last year’s fast falls.
Home prices in 2024 will also be influenced by whether interest rates begin to move lower. Many expect interest rates will be cut at some point in 2024, causing borrowing capacities to increase and mortgage servicing costs to decrease, likely fuelling a continued rise in prices.
