Key takeaways
CoreLogic’s national Home Value Index (HVI) held firm, with 0.0% change in January.
Melbourne (-0.6%), Canberra (-0.5%) and Sydney (-0.4%) recorded a decline in home values in January, while Hobart remained stable.
Adelaide (0.7%), Perth (0.4%) and Brisbane (0.3%) home values have continued to rise but there has been a clear and steady loss of momentum in these markets.
Australia's regional markets hit new heights, with dwelling values across the combined regional areas rising a further 0.4% in January, driven by a renewed boost from internal migration and healthier affordability in some regions. Across the combined capitals, values fell 0.2% over the month.
The HVI is now down -0.3% since the peak in October last year, but with the first rate cut anticipated and consumer sentiment improving, housing prices may see renewed support in the coming months.
National dwelling values were steady in January (-0.03%) with the headline result weighed down by the capital cities,
where values fell 0.2%.
Dwelling values across the combined regional areas of Australia rose a further 0.4% in January, reaching new record highs.
Three of the eight capitals recorded a decline in home values in January, with Melbourne recording the sharpest decline
(-0.6%), followed by the ACT (-0.5%) and Sydney (-0.4%).
Hobart home values were steady in January.
Brisbane and Perth have continued to record growth in home values, but there has been a clear and steady loss of
momentum in these markets, especially in the detached housing sector where value growth has eased more noticeably.
Perth is now recording a slower rate of growth than Brisbane and Adelaide over the rolling quarter.
In the June quarter of 2024, growth in Perth home values was 7.1%, easing back to just 1.0% growth in the three months to January.
Adelaide has shown a more resilient trend, although the pace of gains is slowing, value growth has led the capitals over the past six months with a 4.8% gain.
| City | Month | Quarter | Annual | Total return | Median value |
|---|---|---|---|---|---|
| Sydney | -0.4% | -1.4% | 1.7% | 4.8% | $1,193,228 |
| Melbourne | -0.6% | -2.0% | -3.3% | 0.4% | $772,317 |
| Brisbane | 0.3% | 1.2% | 10.4% | 14.7% | $893,592 |
| Adelaide | 0.7% | 1.8% | 12.7% | 16.9% | $819,363 |
| Perth | 0.4% | 1.0% | 17.1% | 22.3% | $809,870 |
| Hobart | 0.0% | -0.8% | -0.4% | 3.9% | $658,180 |
| Darwin | 0.6% | 1.7% | 0.9% | 7.5% | $502,632 |
| Canberra | -0.5% | -0.5% | -0.5% | 3.8% | $850,534 |
| Combined capitals | -0.2% | -0.7% | 3.8% | 7.6% | $897,632 |
| Combined regional | 0.4% | 1.0% | 5.8% | 10.5% | $656,445 |
| National | 0.0% | -0.3% | 4.3% | 8.3% | $814,293 |
Source: Corelogic HVI 3rd February 2025.
Annual growth in national home values has more than halved since moving through a cyclical peak over the 12 months ending February 2024 (9.7%), slowing to 4.3% in January.
Melbourne (-3.3%), ACT (-0.5%) and Hobart (-0.4%) are all recording annual declines in home values, while Sydney (1.7%) is recording the lowest annual gain since June 2023.
Regional Victoria was the only broad rest of state region where values have declined over the past 12 months, down -2.6%.
Regional housing markets have also shown a slowing trend in value growth however, the aggregate ‘combined regionals’
index has been recording a stronger monthly growth trend relative to the capitals through most of 2024 and now into 2025.
Regional markets seem to be benefitting from a second wind of internal migration, along with an affordability advantage in some markets, and what looks to be some permanency in hybrid working arrangements across some occupations and
industries.
Late last year, ABS reported on working arrangements revealed that 36.3% of employed people usually worked from home, which was down from COVID-highs, but still above the 32.1% reported in 2019.
A shallow downturn?
Factoring in the downward revision to previous months, CoreLogic’s national Home Value Index (HVI) is now down -0.3% from the record highs recorded in October last year.
However, with the first-rate cut likely to be imminent, alongside improving consumer sentiment, we could see some renewed support for housing prices over the coming months.
Lower mortgage rates and a subsequent lift in borrowing capacity as well as an undersupply of newly built housing could be setting the foundations for a relatively shallow housing downturn.
But the easing cycle for interest rates is likely to be a gradual one, and we also have the ongoing headwinds of affordability constraints, normalising population growth and generally soft economic conditions to contend with.
All things considered, the likelihood of a significant growth cycle over the coming year remains low.
Source: Corelogic HVI 3rd February 2025.
Easing turnover alongside slowing value growth
In other signs of a slowdown, the national volume of home sales also appears to have passed its peak.
Annual sales moved through a cyclical high at just under 535,000 in the year to October and have since eased to 526,000 over the year to January.
Outlook
- With the prospects of a rate cut as early as February, the housing outlook is starting to look a little more positive, but we aren’t expecting any material rise in home values until interest rates return closer to the pre-pandemic average and affordability improves further.
The commencement of the interest rate easing cycle will be welcome news for borrowers and prospective buyers alike.
- Also read:Auction Report Feb 22nd 2025 | Steady Auction Week Despite Listing’s Surge and RBA Rate Cut
- Also read:Perth housing market update | February 2025
- Also read:Sydney housing market update | February 2025
- Also read:Melbourne housing market update | February 2025
- Also read:Australian housing market update [CoreLogic’s video] | February 2025
Following a lower-than-expected core inflation outcome for the December quarter, financial markets are pricing in a 95% chance the cash rate will be cut by a quarter of a per cent on February 18th.
Additionally, most forecasts are factoring in three to four 25-basis point cuts from the RBA this year, implying that by year's end, the cash rate would be at 3.35% to 3.6%, still well above the pre-COVID decade average of 2.55%.
Nonetheless, lower mortgage rates should act as a net positive for housing demand, increasing borrowing capacity and providing some repayment relief for borrowers.
Along with lower cost of living pressures, a lift in sentiment and income growth, housing demand should see some support.
2. Low levels of newly built housing should also deliver some support to housing values
The good news for housing supply is that dwelling approvals are once again trending higher, although this is mostly for houses and more evident in WA and SA and to a lesser extent, Qld and Vic.
However, high labour and material costs as well as ongoing competition for key inputs with the public infrastructure sector are likely to keep the flow of new housing supply at insufficient levels for some time yet.
3. A buyer’s market
As borrowing capacity rises with lower interest rates, prospective buyers also have the benefit of more advertised stock to choose from.
Capital city listings are tracking 7.7% higher than a year ago, and some markets are seeing advertised stock levels well above the five-year average for this time of the year, including Sydney, Melbourne, Hobart and the ACT.
4. Some regions have seen a substantial affordability improvement since peaking in 2022.
Hobart has recorded the most significant correction, with dwelling values down -12.5% since moving through record highs in March 2022.
In dollar terms, the median value is now approximately -$93,600 lower.
The ACT has recorded the second-largest decline among the capitals, down -7.1% or roughly -$65,000 from peak levels.
Melbourne values are -6.9% below peak levels, the equivalent to a drop of around -$57,500 in the median value.
5. Other markets are likely to struggle with affordability pressures, even as interest rates drop.
Over the past year, home values in Perth have surged by 17.1% or $118,000, resulting in a 78.2% increase ($355,000) over the past five years.
Adelaide has seen values rise by 12.7% in the last 12 months and by 73.7% over five years.
Brisbane recorded a 10.4% increase over the past year and a 70% rise over five years.
Although Sydney has recorded a relatively mild 1.7% rise in values over the past 12 months, in dollar terms that equates to almost a $20,000 increase.
6. A rise in demand for housing from lower interest rates will be partially offset by slower population growth
After peaking in the first quarter of 2023, the Centre for Population expects net overseas migration to reduce further as overseas arrivals continue to moderate alongside a pickup in departures as the surge in temporary migrant visas expires.
Less migration is likely to flow through to a further easing in rental demand, and, over the medium term, reduced demand for home purchasing.
7. Tighter credit policies could be a wild card potentially slowing housing markets in 2025.
APRA has stated that the risk of financial shocks “has not abated” and the RBA has warned that high household debt levels (especially housing debt) are a key vulnerability.
Any material rise in household debt ratios could be the trigger for tighter credit policies which would likely put a dampener on housing demand, similar to earlier periods of macroprudential polices.
