Home price growth continues into 2024

The housing price upswing that saw prices surge by 8.1% in 2023 has carried over into 2024, according to data analytics firm CoreLogic.

Nationally, home prices increased 0.4% in January 2024, according to CoreLogic’s Home Value Index. 

It’s the 12th straight month of increases in national dwelling values and a quickening of pace from the 0.3% increases seen in the two previous months - November and December 2023.

However, beneath the national headline figure, housing market performance remains diverse across the country, with Melbourne (-0.1%), Hobart (-0.7%), and Canberra (-0.2%) all recording small price declines, while Perth (+1.6%), Adelaide (+1.1%), and Brisbane (+1.0%) continued on their strong growth track. 

Sydney (+0.2%), Darwin (+0.3%), and regional Australia (+0.4%) all recorded modest gains.

“Despite ongoing cost of living pressures, high interest rates, low consumer sentiment and affordability constraints, homes are still selling,” says CoreLogic’s Research Director, Tim Lawless.

“Housing demand has been buoyed by high migration, but also tight rental markets that have probably incentivised renters to transition towards home ownership if they can afford to do so.” 

Go West!

Tim Lawless says Perth is the clear stand out among the capital cities for a persistently rapid rate of capital gains.

“Perth home values rose a further 1.6% in January, on par with the city’s growth trend in November and December and only slightly lower than the recent high of 1.8% recorded in October,” he says.

“The western capital continues to see housing demand outweigh supply, helping to push values 16.7% higher over the past 12 months.”

“Despite that, housing prices remain relatively affordable compared with most capital

cities, with the median dwelling value sitting just under $677,000.”

And that’s despite homes in Perth being - on average - just under 50% more expensive than they were at the onset of COVID-19 in March 2020.

The outlook

While median prices in Perth ($676,823), Adelaide ($721,376), and Brisbane ($796,818) were all at record highs in January, the price of a home in Sydney ($1,122,430) is still 2.4% below the harbour city’s all-time peak in January 2022, while Melbourne ($777,250) is 4.2% below its peak in March 2022.

CoreLogic usually doesn’t make firm predictions about house price growth, but it notes that interest rates appear to have peaked and inflation is moderating.

Tim Lawless also points out that the recent home price growth has come at a time of deeply pessimistic consumer sentiment, which is unusual, as “historically there has been a strong correlation between consumer confidence and home purchasing activity.”

He says this divergence is “probably attributable to high migration and unusually tight rental conditions”, but believes “any lift in consumer attitudes should play out positively for housing market activity.” 

“With inflation easing and the prospect of rate cuts later this year, we should eventually see sentiment moving higher,” he says.

Rents 

CoreLogic’s latest report also shows the pace of rental value growth lifted in January, with the firm’s national rental index recording its strongest monthly rise since April, with rents up 0.8%, following a 0.6% rise in December.

“Most years see rental growth accelerating through the March quarter as competition from students and new year leases adds to rental demand,” explains Tim Lawless.

“It’s looking like we will see a similar trend this year with the usual pattern of higher rental growth emerging in January.”

But he believes there may be some relief for stressed renters on the horizon.

“Less overseas migration should help to ease rental demand, especially in the largest capitals where a higher portion of overseas migrants have settled historically.”

The alternate view…

CoreLogic’s relatively upbeat report makes an interesting contrast with REA Group’s PropTrack Home Price Index - released on the same day. 

Using a different method for calculating home values, it concludes that national price growth was decidedly anaemic in January 2024, at a tiny 0.02%.

PropTrack says prices eased in Sydney (-0.04%), Melbourne (-0.09%), Adelaide (-0.13%),

and Canberra (-0.13%), while they just ticked up in Hobart (0.09%) and Brisbane (0.17%).

“Home price growth has slowed from what we were seeing in the middle of 2023, with national prices relatively unchanged since November,” says PropTrack’s Senior Economist Angus Moore.

“Several factors have contributed to the slowdown, including the additional interest rate rise in November and more homes hitting the market in late winter and spring, giving buyers more choice.”

However, like CoreLogic, PropTrack agrees Perth is the standout.

“Perth was the only city to record notable monthly growth, with prices up 0.5% in January,” according to Mr. Moore.

Nevertheless, despite the lacklustre growth, REA Group remains optimistic about 2024.

“We expect prices in 2024 will still grow, albeit at a slower pace than in 2023,” says Angus Moore.

“A more stable interest rate environment, coupled with ongoing population growth and a low level of new building activity, will support home price growth this year.”