In September, Australian home prices hit a new all-time high, and some areas saw growth in the double digits this year.
According to PropTrack, 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.
Eleanor Creagh, Senior Economist at PropTrack, said:
"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."
Where house prices have surged?
According to PropTrack's data, after leading the downturn in 2022, the Sydney property market has led the recovery.
In fact, 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.
Further, four of the top 10 regions across the country where house prices have recorded the largest lift this year are in Sydney.
PropTrack's data also noted that 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 stood out by not following the downward trend in 2022.
This year, they continue to show strong growth and are the top-performing capital cities in terms of annual price increases, with Perth rising by 9.24% and Adelaide by 8.31% since September 2022.
Buyers are competing for limited choices, and affordability is less of a constraint.
Creagh commented:
"Although Sydney led the turnaround, Brisbane property 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%."
Where unit prices have risen the most
PropTrack data highlights that 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 the rest of the state areas.
Six out of the top 10 regions where unit prices have recorded the largest lift year to date are in Queensland.
Several factors have contributed to the stronger price growth in these regions.
In Sydney, a robust increase in population, especially with more people moving in from overseas, likely boosted the demand for housing.
At the same time, areas like Perth, Adelaide, and South East Queensland have likely benefited from their affordable housing options, growing populations, and people moving in from other states.
Queensland and Western Australia continue to attract a significant number of interstate migrants, likely leading to a higher demand for housing.
Will the price growth continue?
The rebound in home prices this year has been driven by a combination of factors.
One key factor is the limited number of homes available for sale, leading to fierce competition among buyers.
Additionally, record levels of net overseas migration, challenges in the rental market, and a shortage of new housing have all played a role in supporting home prices.
The speed of home price growth has surprised many, and 2023 is expected to be a strong year for many housing markets.
In October, the Reserve Bank decided to keep interest rates steady for the fourth month in a row.
Unless there's a significant change in the outlook for low inflation, it's likely that we've seen the peak in interest rates for this current period of monetary policy tightening.
Moreover, the spring selling season kicked off energetically in September, and both buyers and sellers are feeling more confident. In major cities, the housing market is offering more choices for buyers.
Creagh further commented:
"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 continues, many indicators are showing better conditions.
Sales have gone up, auctions are more active, and auction clearance rates are staying strong.
Creagh further said:
"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."
A final note for investors
As I always say, when it comes to property investment, the focus should be on investment-grade properties in A-grade locations.
Never follow a trend or buy in hotspots or growth areas because these won’t give you the long-term growth that you’re looking for.
I’m talking about areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.
