Key takeaways
National home prices have reversed their downward trend, with price falls easing into the end of last year and now moving upwards.
National home prices were largely stable in March, rising slightly by 0.13%. The cumulative increase in 2023 is now 0.49%.
While home prices have fallen from their peak in most markets, prices nationally are still 29.9% above their pre-pandemic levels.
Prices bounced in every capital city, except Hobart (-0.43%), Darwin (-0.10%) and Brisbane (-0.06%), with Sydney (+0.27%), Perth (+0.24%) and Melbourne (+0.12%) recording the largest increases.
While interest rates have been the primary driver of price falls to date, the recent upturn has been influenced by the limited supply of properties for sale.
Even though buyer demand is weaker than peak levels seen last year, softness in new listing volumes and tight supply has offset this, leading to a pickup in competition among potential buyers that has buoyed values.
Home prices have lifted in March according to PropTrack who believe the end of interest rate rises are in sight.
Proptrack Senior Economist Eleanor Creagh explained that limited supply, along with strong migration and higher rents, are underpinning property values.
The Australian housing market has experienced significant changes in recent times, with home prices exhibiting a trend of lifting despite the reduction in borrowing capacities and the deterioration of affordability due to interest rate rises.
This counterintuitive phenomenon can be attributed to a combination of factors working in tandem to counterbalance the downward pressure on prices.
Key demand drivers that are playing a pivotal role in this process include the resurgence of immigration, which has seen a strong rebound after the pandemic-related disruptions.
This influx of new residents has contributed to a tightening rental market, leading to increased demand for housing.
Additionally, wages have begun to grow at a slow yet steady pace, further bolstering the demand for homes.
Another significant factor preventing a steep decline in home prices is the persistent softness in new listing volumes, which effectively provides a safety net for prices.
According to Creagh, if the Reserve Bank of Australia decides to put a halt to its tightening cycle this month or the next, the bottoming process for home prices could continue, leading to further stabilisation.
This pause in tightening could alleviate some of the uncertainty that buyers have been grappling with in terms of borrowing capacities and mortgage servicing costs, subsequently giving a much-needed boost to their confidence.
Nevertheless, challenges still persist, as the full impact of the recent rate rises has not yet been fully absorbed by the market.
This implies that the decline in home prices could potentially regain momentum, especially if there is an uptick in new listing volumes in the months to come.
Therefore, while the lifting of home prices in Australia appears to be supported by several positive demand drivers, it's still too early to call a market bottom.
Here's a State by State breakdown from the Proptrack Home Price Index Report for March 2023
Sydney housing market update
Proptrack reported that Sydney home prices recorded a 0.27% increase in March.
So far this year, Sydney has seen the greatest lift in values out of all capital city markets, with fewer homes on the market underpinning home prices.
Positive demand drivers stemming from the shortages in rental supply and rebound in international migration are playing a part.
Sydney has seen the largest correction of the capitals, with home prices falling 7.19% from peak to trough.
The recent bounce in Sydney may have been influenced by the tax changes implemented by the former New South Wales Government according to Proptrack Senior Economist Eleanor Creagh.
These changes allowed most first home buyers the choice of paying an annual land tax rather than a one-off stamp duty, boosting up-front purchasing power.
Melbourne housing market update
Proptrack reported that the downturn in Melbourne eased toward the end of 2022, with home values stabilising and lifting in recent months.
In March, home prices rose 0.12%, with the weaker flow of new listings increasing competition among potential buyers.
As a result, sellers have benefited from less competition with other vendors.
The constrained level of properties available for sale has concentrated buyer demand and is putting a floor under home prices.
Whether this stabilisation continues, or prices resume their fall, will be influenced by the level of supply, as well as the trajectory of interest rates according to Proptrack Senior Economist Eleanor Creagh.
Brisbane housing market update
After lifting in January and February, Brisbane home prices recorded a small fall in March (-0.06%), according to Proptrack Senior Economist Eleanor Creagh.
Despite the flow of new listings remaining soft.
Conditions in Brisbane quickly shifted last year due to the substantial tightening in interest rates and prices are now 3.30% below their peak recorded in April 2022.
Perth housing market update
Perth home prices recorded a 0.24% increase in March to reach a new price peak.
This relatively affordable market has held up better than other capitals over the past year, with prices increasing 3.23%.
After Darwin, Perth is the cheapest capital city market in terms of dwelling values.
The share of average incomes taken by mortgage repayments on a median priced dwelling in Western Australia is also the lowest in the country, with the exception of the Northern Territory.
Adelaide housing market update
Adelaide saw home prices rise to a new peak in March, lifting a further 0.10%.
Home prices are up 6.26% on an annual basis, making it the strongest performing capital city market over the past year.
The comparative affordability of the city’s homes has seen prices holding up better as interest rates have quickly risen.
Low stock levels are also helping to insulate home values, with increased competition among potential buyers according to Proptrack Senior Economist Eleanor Creagh.
Hobart housing market update
Home prices in Hobart fell 0.43% in March and are now 5.27% below their peak recorded in April 2022.
The magnitude of price declines in Hobart has eased in recent months from the faster pace seen in June and July last year when interest rates first started rising.
Listing volumes are less constrained relative to the other capital cities and to historical levels in Hobart, giving buyers more choice and removing a pillar of support for prices .
ACT housing market update
Price falls in Canberra have eased in recent months from the faster pace seen mid-last year.
In March, prices rose slightly by 0.03% and are now 5.98% below their peak in March 2022.
