House Prices Soar in October, Approaching New Record Highs

October saw house prices notch a 9th consecutive month of growth, with CoreLogic reporting a 0.9 per cent increase in its Home Value Index (HVI).

October’s figure was an acceleration on September’s performance and a possible indication of what’s to expect over the coming months, as the spring selling season gets well and truly underway.

While it's good news for homeowners, it might trigger a sense of urgency to prospective buyers yet to crack into Australia’s coveted housing market. 

Especially as house prices nationally are now just a mere 0.5 per cent below the historical high reached in April last year, prior to when rate hikes began.

House prices just weeks away from new national record

Tim Lawless, research director at CoreLogic, believes we’re now just weeks away from a new record peak in the national house price.

“At this rate of growth, we will see the national HVI reach a new record high mid-way through November, recovering from the -7.5 per cent drop in values recorded over the recent downturn between May 2022 and January 2023,” said Mr Lawless.

Brisbane, Perth, and Adelaide have already reached new record highs, with house prices there continuing to outperform their capital city peers.

Nevertheless, Sydney (and Brisbane) still managed to accumulate over 10 per cent in value growth over the past 10 months, despite rapidly rising interest rates.

Overall, house prices have defied all expectations, avoiding the catastrophic downturn that was initially predicted at the outset of the RBA’s rate hiking cycle. The downturn that did eventuate was short-lived, with other external pressures proving to be more influential than rising rates.

Factors like record high migration, constraints within the construction industry, and limited housing supply have created upward pressure, driving the robust recovery.

Not keeping up

There are some regions, however, that haven’t fared as well as others. The rest of the state regions continue to trail behind in their recovery, namely Regional Victoria, where prices have remained somewhat stagnant over the past three months.

In broader terms, the divide in performance is clear between the capitals and the regions. 

According to CoreLogic’s HVI, the annual change in home values for the combined regions measures just 2 per cent. It’s a stark contrast to the combined capitals, which are up 6.8 percent over the past 12 months.

The winners

The release of CoreLogic’s most recent Hedonic Home Value Index outlined some clear winners and losers in the property market. 

Suburbs where growth reigned supreme within the capital cities included Armadale in Perth (21%), Rockingham (17.3%), Gosnells (16.5%), Kwinana (16.4%), Mandurah (16%), Nathan in Brisbane (14.9%), Mt Gravatt (14.8%), Marrickville in Sydney, Sydenham and Petersham (14.8%).

Regionally, suburbs that outperformed their counterparts were mainly in Queensland, Western Australia, and South Australia.

South Australia’s Yorke Peninsula came out on top, clocking 14.4 per cent growth, with the Limestone Coast also performing well, with 9.9 per cent growth. Queensland’s Surfers Paradise (11.3%), Bundaberg (10.4%), Nerang (10.3%), Northern Gold Coast (10.2%), and Darling Downs East (9.8%) topped the charts too, with Western Australia’s Bunbury (9.8%) joining the ranks.

Buyers becoming priced out

The past nine months of growth have painted an entirely different picture for homebuyers looking to get a foot on the property ladder as compared to the beginning of this year.

Median property prices have climbed substantially, with Sydney’s median house price now sitting just below $1.4 million. In February this year, that figure was hovering just above $1.2 million. It means Sydney home buyers biding their time may now have to pay almost $200,000 more just to secure a home. 

It’s a similar story in Brisbane. According to CoreLogic figures, the median house price now sits at $860,000 - almost a whopping $100,000 more than Brisbane’s median house price of $767,000 back in February.

Nationally, the past eight months have seen the median house price increase by $50,000, or 5.6%. In a cost of living crisis with rising interest rates, the unprecedented increase in home values is a phenomenon, and one that adds insult to injury for buyers who’ve watched prices rise before their eyes.

What’s next for the market?

While the general consensus among economists seems to be that an additional rate hike is on the RBA’s agenda for next Tuesday, there’s not much reason to believe another rate rise could dampen house price growth.

Especially after 12 rate rises have failed to take the steam out of the market’s recovery so far. 

Instead, strong migration, construction industry constraints and an extra tight job market could continue to keep house prices afloat.

Chief economist at Deutsche Bank, Phil O’Donaghoe, told AFR’s Nila Sweeney, that the tight labour market has been a large denominator in the resilience of house prices, with Australians opting to work more hours, rather than sell their homes in despair.

“There’s no question that cost of living pressures are too high, compounded by rising mortgage costs. But what we can see in the data, which we didn’t realise a year ago, or even just six months ago, is that households have responded by increasing their supply of labour,” said Mr O’Donaghoe.

“People are working longer hours, one-income households are now two-income households and part-time workers are switching to full time. So it’s the dynamism of the household sector that’s supported the market.”

Australians have long been described as ‘obsessed’ with property, and it seems we’ll go to great lengths to keep ours - even taking on a second job.

All eyes will be on the RBA come next Tuesday, but even with another rate hike, it’s likely that Australian homeowners will take solace in predictions of the rate cuts to come next year.