Home prices continued to fall in 2022, but this year has been very different.
High levels of migration, a tough rental market, and limited housing availability are balancing out the effects of significant interest rate increases and a slowing economy, causing home prices to rise. Capital city markets have led 2023's price upturn, with regional areas having had slower growth.
House price growth has accelerated right around the country, with the exception of regional SA and NT. Unit prices have recorded stronger growth for much of 2023, and that house prices have underperformed throughout the pandemic period.
Demand for inner-city units was reduced due to closed borders and preference shifts towards larger dwellings and regional areas, but that this trend has reversed with reopened cities and borders, the strong rebound in migration and the relative value in the apartment market.
The latest PropTrack Home Price Index revealed that the 2023 price upturn is firmly entrenched with home prices hitting fresh record highs in many markets in October.
Clearly, price growth has accelerated since 2022.
According to PropTrack's data, in the year to October 2022, national home prices had risen just 0.19% after falling 3.68% from a peak in March 2022.
Eleanor Creagh, Senior Economist at PropTrack said:
"National home prices continued falling until the end of the year, eventually hitting a low point in December 2022 after falling for 9 straight months, sliding 4.04% from peak to trough.
This year has been very different, despite interest rates continuing to climb higher in February, March, May and June."
High levels of migration, a tough rental market, and limited housing availability are balancing out the effects of significant interest rate increases and a slowing economy, causing home prices to rise.
PropTrack's data show that national home prices entirely reclaimed 2022’s price falls last month, with the upswing continuing in October.
National home prices climbed 0.36% month-on-month to set another fresh record, rising 4.93% so far this year.
Ms Creagh commented:
"In 2022 regional areas were outperforming capital cities, and when interest rates were first rising at a fast pace, prices held up better for much of last year in the regions.
However, capital city markets have led the price upturn in 2023 while regional areas have had slower growth.
The pace of growth in regional markets has begun to increase after lagging much of this year and in October, regional prices rose 0.32% to set a fresh record high."
PropTrack's latest data also highlights that prices in the combined capital cities also set a fresh record high climbing 0.37% month-on-month.
Capital city markets, with the exception of Brisbane and Darwin, outperformed their regional counterparts on a monthly basis in every state in October.
Ms Creagh further commented:
"Price growth has accelerated right around the country relative to earlier in the year, with the exception of regional SA and NT.
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Sydney and Brisbane led the turnaround and have completely recovered from the fast falls of 2022, with both markets hitting fresh price peaks in October.
Although the recovery is lagging in Melbourne, Hobart, and Canberra, home price growth has accelerated relative to earlier in the year.
Prices didn’t fall in 2022 in Adelaide and Perth, but growth accelerated as the falling price trend reversed in other markets, with prices hitting fresh peaks in each of these markets in October."
From November 2022 to September 2023 units have recorded a stronger pace of growth.
After underperforming throughout the pandemic period, unit prices held up better in 2022 when prices were falling, based on PropTrack's data.
Units have recorded stronger growth than houses for most of the year to date.
In late 2021, annual house price growth was more than 13 percentage points higher than for units – 26.5% year-on-year versus 12.9% year-on-year in November 2021 respectively.
Ms Creagh explained:
"Reduced demand for inner-city units due to closed borders and preference shifts towards larger dwellings and regional areas resulted in significant outperformance of house prices relative to units through the pandemic period.
This trend has reversed with reopened cities and borders, the strong rebound in migration and the relative value in the apartment market after a long stretch of underperformance, particularly with maximum borrowing capacities having reduced by about 30% after interest rates rose 400 basis points."
According to Ms Creagh, markets in parts of SA, WA and Queensland continued to be the top-performing areas over the past year, recording growth in prices of 9% or more over the past year.
She further noted:
"These markets also largely avoided the downturn in prices in 2022, due to a combination of factors: more affordable homes, heightened interstate migration during the pandemic, and particularly for Perth, very low stock on the market.
In Perth, the total number of properties currently listed for sale is at a record low.
In October, Sydney’s Parramatta region was a new entrant to the list of highest growth regions over the past year, with prices 9.99% higher than a year ago, closely followed by the eastern suburbs where prices are up 9.52% compared to October last year.
Within Sydney, inner city areas and more expensive regions have had the strongest rebound in prices compared to a year ago.
That reverses the pattern seen in 2022’s downturn when more affordable peripheral areas were holding up better."