Australian dwelling values increased a further 0.7% in June, taking growth to 8% across the 2023-2024 financial year, the equivalent of a $59,000 increase in the median value.
Note: The annual rise was in stark contrast to the previous financial year when CoreLogic's national index was down 2%.
In that year, annual growth was way down by a 7.5% drop in values in the nine months following the May 2022 cash rate hike.
Despite the strong annual gain, the quarterly rate of growth has eased since the highs of mid-2023 when the pace of gains peaked at 3.3%.
The most recent June quarter saw dwelling values rise by 1.8%, which is roughly in line with the March quarter at 1.9% and the December quarter last year at 1.8%.
Change in house prices, 12 months to June 2024:
Source: CoreLogic
It seems the national index has found a groove, rising between 0.5% to 0.8% month on month since February.
The persistent growth comes despite an array of downside risks, including high interest rates, cost of living pressures, affordability challenges, and tight credit policy.
The housing market's resilience comes back to tight supply levels, which are keeping upwards pressure on housing values.
Regional Property Markets
Beneath the national headline numbers, the market's running at different speeds, but most regions are trending higher in value.
- Melbourne and regional Victoria were the exceptions with values down 0.2% and 0.3% respectively over the month.
- Hobart has also shown weaker conditions, although values were relatively flat in June.
- Hobart joined Melbourne and regional Victoria recording a subtle decline in values over the June quarter and down 0.1% over the financial year.
- Regional Victoria was the only other broad region to record a fall in values over the year, down 0.5%.
- Strong conditions have remained a feature of the mid-sized capitals, especially Perth where values surged another 2% in June to be almost 24% higher over the year.
- Adelaide values increased 1.7% in June to be 15.4% higher over the financial year, and Brisbane housing values are up 1.2% over the month and 15.8% higher over the year.
Note: Regional markets have shown a similar trend to the capitals with the regional areas of Western Australia, South Australia, and Queensland leading the pace of capital gains, while regional Victorian dwelling values fell by 0.5% over the year, and regional Tasmania recorded a mild 0.7% rise.
Housing Trends Across Capital Cities
Now let's take a look at the housing trends across each of the capital cities.
Sydney
In June, Sydney dwelling values reached a new record high, surpassing the previous peak from January 2022, with a monthly increase of 0.5%.
After a 12.4% decline from January 2022 to January 2023, the market took 17 months to recover to these new highs.
Source: CoreLogic
While home values have been rising, the growth rate has slowed significantly, dropping from nearly 2% per month a year ago to just 0.5%, or about $6,000 monthly.
Similarly, the rental market has seen a decline in growth, with annual rental increases slowing from 11.1% last year to 7.9% in the most recent financial year.
You may also want to read: Sydney Housing Market Update
Melbourne
Source: CoreLogic
House values fell by 0.3%, countering a 0.2% rise in unit values.
The upper quartile of the housing market saw a 0.5% decrease, while lower quartile values increased by 0.3%.
Additionally, listing numbers rose significantly, up 17.5% from last year and 13.5% above the five-year average, providing buyers with more choices and negotiation opportunities.
You may also want to read: Melbourne Housing Market Update
Brisbane
Brisbane dwelling values rose 1.2% in June, maintaining a steady increase of over $10,000 monthly.
Source: CoreLogic
The unit sector outperformed, with values up 10.3% in the first half of the year, compared to a 6.5% rise in house values.
Rental growth has moderated, with annual rent increases dropping from 9.4% to 8%, primarily due to slower unit rent growth, while house rents saw a slight uptick from 7.7% to 7.8%.
You may also want to read: Brisbane Housing Market Update
Adelaide
The Adelaide housing market continues to show strong price growth, with values up 15.4% over the past year.
Source: CoreLogic
Low supply levels are driving competition and price increases, especially in more affordable areas like Playford and Salisbury.
Rents are also still rising rapidly, although at a slightly slower pace than last year.
You may also want to read: Adelaide Housing Market Update
Perth
In June, the number of homes advertised for sale in Perth was 23% lower than at the same time last year and 46% lower than the previous five-year average.
Source: CoreLogic
The rental market in Perth is showing little evidence of a slowdown, recording a 2% rise in values in June and a 23.6% increase in the last financial year.
You may also want to read: Perth Housing Market Update
Hobart
Hobart home values edged 0.1% higher in June after falling by 0.9% in May.
Reading through the monthly volatility, conditions are generally flat with values rising by just 0.2% through the first half of the year, but down 0.1% in the financial year.
Advertised stock levels remain well above levels recorded through the pandemic, tracking 46% above the five-year average.
With such high stock levels, homes are taking a median of fifty-two days to sell, the longest days on market of any capital city.
While home values are broadly flat, rental growth has reaccelerated over the year from a 0% change in the financial year of 2022-2023 to a 2% rise in the latest financial year.
Darwin
Darwin dwelling values were unchanged in June, but have increased by 1.6% through the first half of the year to be 2.4% higher in the financial year, well below the combined capital cities average of 8.3% growth.
The unit sector continues to act as the main drag on growth with values down 1.6% in the first half of 2024, while house values have increased by 3.3%.
Source: CoreLogic
With relatively modest growth conditions, Darwin home values are yet to stage a nominal recovery from the record highs recorded a decade ago all the way back in May of 2014.
Note: The June update puts Darwin dwelling values 5.7% below the record high.
Rental conditions have eased a little through financial year 2024 with the annual pace of rental growth slowing from 3.5% in the financial year of 2022-2023 to 3.1% in the latest financial year.
Canberra
ACT home values have been on a relatively soft trajectory, rising 0.3% in June to be 1.2% higher through the first half of the year and 2.2% higher in the financial year.
Values remain 5.4% below the record highs recorded in May of 2022.
Source: CoreLogic
The unit sector has been the main drag on growth rates with values down 1.1% over the past year, while house values have risen by 3.2%.
Rental markets have reaccelerated over the past twelve months with rents rising 2.5% in the last financial year, a sharp turnaround from the 3% fall in rents in the previous financial year.
- Also read:Australian housing market update [CoreLogic’s video] | July 2024
- Also read:Latest Asking Prices State by State | Winter Lull takes Affect with Huge falls in Home Listings
- Also read:What does median home price really mean?
- Also read:Brisbane’s property market forecast for 2024
- Also read:Melbourne property market forecast for 2024
Supply and Demand Dynamics
An undersupply of housing remains the primary factor keeping upwards pressure on housing values despite a growing element of downside risk.
We can loosely categorize housing supply into advertised listings, which provide a measure of available supply, newly built homes, and rental supply.
We could also add to the list social housing.
Each of these components remains insufficient to varying degrees to cater for housing demand, which is why we're seeing values persistently rising at a time when interest rates and inflationary pressures are high, sentiment is deeply pessimistic, and credit policy is tight.
Most cities are now seeing more new listings coming to the market as vendors become more active.
Nationally, the flow of freshly advertised stock was tracking 10% higher than a year ago and 7% above the previous five-year average.
However, most of these homes are being purchased as fast as they're being added to the market with total advertised supply levels nearly 17% below the previous five-year average.
The rise in new listings could be a signal that more homeowners are motivated or need to sell.
Note: It's clear that savings accrued through the pandemic are now being drawn down for some households longer.
Despite what's likely to be an increased level of financial hardship amongst households, the latest data from APRA for the March quarter shows mortgage arrears are rising but remain contained.
The combined arrears rate reached 1.6% in the first quarter of the year, slightly lower than the arrears rate at the onset of COVID-19, which was at 1.8%.With inflation remaining high and the risk of another rate hike or at the very least a longer period before interest rates come down, it's likely mortgage stress and arrears will rise further.
The risk of financial stress is amplified by a combination of high household debt levels and loosening labour market conditions.
Given the strong and broad-based rates of capital gain across the past four years, most homeowners who need to sell should be able to clear their mortgage debt.
CoreLogic's latest pain and gain report highlighted the vast majority of vendors are selling their homes for a gross profit on resale, with only 5.7% of homes selling at a gross loss.
That's the lowest portion in fourteen years.
Similarly, the RBA's latest financial stability review estimated only around 1% of home loans had a debt level higher than the asset value.
Although the risks facing the housing sector are growing, we're still expecting home values to rise, at least in the near term.
A material rise in new dwelling supply is likely to be a long time coming, considering approvals are holding well below average levels, and barriers to construction, including compressed profit margins and scarce labor supply, remain significant.
Until supply and demand rebalance, there's likely to be further upwards pressure on home values.
