New figures show some of the heat has come out of the housing market, with more homes for sale in some cities, including Sydney and Melbourne, helping to moderate price growth.
However, a strong increase in values in Perth, Brisbane, and Adelaide is being fuelled by a chronic shortage of properties on the market.
CoreLogic’s national Home Value Index rose 0.6% in November.
It’s the smallest monthly gain since prices hit a floor in January this year, before starting to rebound.
Despite the slower growth, the index reached a new record high in November.
Home values started falling around the time the Reserve Bank of Australia began raising the cash rate from its pandemic emergency level of 0.1% in May 2022.
This saw the home value index fall 7.5% from its April 2022 peak.
However, since January this year, housing values have climbed 8.3% higher, as low supply and strong population growth saw buyers shrug off progressively higher interest rates.
More stock on the market…
More homes being put up for sale saw price growth ease in several cities, including Sydney and Melbourne.
Home values in Sydney grew by 0.3% in November - the smallest monthly gain since prices started recovering, while Melbourne and Hobart both eased 0.1%, and Darwin was down 0.3%.
In these cities, there’s been more stock available, with some vendors listing to take advantage of the traditional Spring “selling season”.
According to CoreLogic, over the four weeks to November 26th, advertised stock levels were above the previous five-year average in Hobart, Canberra, Melbourne and Sydney.
“In these cities, market conditions are now in favour of buyers as higher stock levels provide more choice, less urgency and greater opportunities to negotiate,” says CoreLogic’s Research Director Tim Lawless.
“The Melbourne Cup day rate hike (by the RBA) has clearly taken some heat out of the market, but other factors like rising advertised stock levels, worsening affordability and persistently low consumer sentiment are also acting as a drag on value growth in some markets.”
…but not in Perth, Brisbane and Adelaide.
It’s a different story in the other major capitals.
Home values in Perth actually picked up pace in November, posting the largest monthly gain since March 2021 at an impressive 1.9%.
Brisbane (1.3%) and Adelaide (1.2%) also steamed ahead.
Mr Lawless says the three cities continue to show remarkably low levels of advertised supply while purchasing activity remains above average.
“This imbalance between available supply and demonstrated demand is keeping strong upward pressure on housing values across these markets,” he says.
“Perth listings are nearly 40% below their five-year average for this time of the year, while listings are more than 30% below average in Brisbane and Adelaide.”
“Unsurprisingly, these cities are continuing to show a consistently high rate of growth amid strong selling conditions,” he says.
Outside the capital cities, CoreLogic’s combined regionals index rose 0.6% in November.
However, housing values in regional Australia remain 1.8% below the historic high recorded in May 2022.
The rental market remains strong
CoreLogic says rental markets across the capital cities remained extremely tight in November
with vacancy rates at 1.0%.
Adelaide (0.3%), Perth (0.6%) and Melbourne (0.8%) are the tightest rental markets, while Sydney (1.2%) and Brisbane (1.3%) continue to record rates well below average levels.
Rents have been rising nationally since August 2020, and CoreLogic says Perth is leading the nation for growth in rental costs.
Rents for houses in Perth were up 3.1% over the three months ending November, while unit rents rose even faster, up 3.4%.
CoreLogic says November is also the first time in six months that rents have risen at a faster rate nationally than home values, which it says provides some support for gross rental yields.
The outlook
Looking ahead, CoreLogic says the rate of growth in home values across Australia is “becoming more diverse, but generally weakening.”
“The lower than expected monthly inflation outcome for October may help to allay fears of further rate hikes and lift consumer spirits a little,” Tim Lawless says, “but the risk of another increase in the cash rate remains.”
Interestingly, the slower price growth in the largest markets of Sydney and Melbourne has been more pronounced at the top end of the property market.
“The more expensive end of the market tends to lead the cycles in these cities,” he added.
“As borrowing capacity reduces, we may be seeing more demand deflected towards lower housing price points, with the broad middle of the market now recording the strongest rate of growth in Sydney and Melbourne.”