Australian home prices continue to defy tough economic times

Australian home prices rose across the combined capital cities for the sixth consecutive quarter, according to a new analysis from Domain Group. This was despite the highest interest rates in more than 12 years, a cost-of-living crisis, and a per capita recession.

However, Domain’s latest House Price Report says the pace of price growth is showing signs of deceleration, particularly in capital city unit markets. 

The details

Domain says new records were set for median house prices in Sydney, Brisbane, Adelaide, and Perth, and in Brisbane, Adelaide, and Perth for units during the June quarter of 2024.

Sydney house prices rose by $21,000 (1.3%), reaching a record high of $1.66 million.

Melbourne house prices have still not fully recovered from their pandemic boom heights and are still down -2.4%, but the June quarter saw solid median price growth of $18,000, or 1.7%, to reach $1,068,805.

With Brisbane experiencing stellar 4% growth, Domain says the Sunshine State capital is now on track to surpass $1 million for house prices next quarter.

Booming Perth and Adelaide also saw strong house price growth, with Perth houses jumping an astonishing 6.6% in three months to clock up yearly growth of 23.8% (new record median price $852,240) while the South Australian capital saw 2.6% quarterly growth (16% annually to new record median price of $929,972).

With median houses in Perth smashing through the $800,000 barrier, Domain calculates prices have risen by $448 per day over the past year in the WA capital - the steepest rise in the city’s history.

Hobart was the only capital city where prices went backwards (-1.1% for the quarter to a median price of $686,053) and is now 10% below its house market peak in March 2022.

Domain says price growth for units “decelerated significantly” in the June quarter of 2024, growing at a rate four times slower than the previous quarter.

However, it was a mixed picture across the country, with Brisbane (+3.2% to new record median price of $579,823), Adelaide (+5% to new record median price of $511,039), and Perth (+7.8% to new record median price of $466,720) all shining during the June 2024 quarter.

Unit prices in Sydney (-0.6% to median price of $797,212), Melbourne (-1.7% to median price of $555,461). and Darwin (-3.4% to median price of $342,886) all eased.

The take-out

Domain says the varied growth trends across the capital cities are influenced by “different supply and affordability constraints.” 

It points to a 7% annual increase in homes on the market and a 9% increase in new listings, indicating restored seller confidence due to sustained price rises.

However, with interest rates high, stretched affordability appears to be increasing the time it takes to sell homes in some cities.

“The housing market remains resilient despite low consumer sentiment, economic pressures and high interest rates, " says Domain’s Chief of Research and Economics, Dr Nicola Powell.

“Supply still remains constrained overall, weighed against a surge in demand from strong population growth and a tight rental market.” 

“Demand is also being sustained by rising investor activity which may inevitably shift focus to units.” 

Interestingly, Dr Powell says she believes it’s likely that “current demand is being propped up both by existing leverage from the property market and the “Bank of Mum and Dad” – factors likely to become stronger due to ongoing price growth.” 

Move towards larger rentals 

Separate research by rival analytics firm CoreLogic points to some of the reasons why price growth may be slowing for units.

National median weekly rents hit a fresh record high of $634 per week in June, up $48 in a year, and this new affordability pressure has led to tenants starting to favour larger dwellings. 

“A slight slowdown in net overseas migration might also be a driving factor slowing demand for smaller, inner-city units,” says CoreLogic Australia’s Head of Research, Eliza Owen.

CoreLogic has recently started analysing housing market performance by the number of bedrooms a home has.

The data shows there are currently stronger rental growth trends in larger dwellings, which CoreLogic says may be “reflecting the formation of share houses or multiple family households, with an 8.7% rise in rent for houses with five bedrooms or more.”

This is contrasted with a slowdown in the rent growth of smaller dwellings, “with annual growth in one-bedroom units and studios slowing from 16.8% in the year to April 2023 to 7.1% in the past 12 months.”

“The average rent for a bedroom becomes cheaper the higher the number of bedrooms a dwelling has,” Ms Owen says.

Sydney renter “Jean” is a good example of this trend of tenants living in larger rentals.

She recently ended her sole tenancy on a one-bedroom $530 a week apartment in the northwestern suburb of Carlingford to move into a 5-bedroom share house in Alexandria in the inner south, where she pays $280 a week for a room. 

“It’s great,” Jean says.

“I’ve halved my rent and more than halved my commute time to the CBD for work.”