Perth and Adelaide take off as Melbourne and Sydney slow down

New figures for July 2024 from two different data houses show conditions in property markets across the country are diverging, with continuing strong growth skewed towards the medium-sized cities of Brisbane, Perth, and Adelaide. 

Both reports—CoreLogic’s monthly Hedonic Home Value Index and REA Group’s PropTrack Home Price Index—also show that both Adelaide and Perth are set to bypass Melbourne in terms of median values and prices, making the Victorian capital one of the cheapest Australian cities to buy a home in.

CoreLogic’s HVI:

CoreLogic says Australian home values rose 0.5% in July 2024, the 18th consecutive monthly increase in home values nationally. 

The firm’s HVI index has gained 13.5%, with values pushing to new record highs since November last year.

The median home in Australia is now worth $798,207 ($865,159 for a house and $652,524 for a unit or apartment), according to CoreLogic.

While the headline growth rate has hit new highs, CoreLogic says, “It is clear momentum is leaving the cycle, and conditions are becoming more diverse.”

During July, values declined in Melbourne (-0.4%), Hobart (-0.5%) and Darwin (-0.2%), while the pace of growth has slowed markedly in Sydney to 0.3%. 

However, the mid-sized capitals are continuing to buck the slowing trend, with booming Perth recording outstanding growth of 2% for the month, Adelaide 1.8%, and Brisbane 1.1%.

CoreLogic’s Research Director, Tim Lawless, says housing supply is the key factor explaining the diverse outcomes between the capitals.  

“The number of homes for sale in Brisbane, Adelaide and Perth is more than 30% below average for this time of the year, while weaker markets like Melbourne and Hobart are recording advertised supply well above average levels,” he says.

The fact that median home values in Melbourne have eased over the last quarter by 0.9% while Adelaide’s value growth has actually accelerated to 5% means the South Australian capital will probably overtake Melbourne for the first time in the next few weeks.

In the next month, CoreLogic also expects Melbourne’s median dwelling value to be eclipsed by Perth, making the Victorian capital one of the cheapest cities in Australia in which to buy a home.

Again, value growth has been led by more affordable sections of the market.

“An erosion in borrowing capacity and affordability factors is skewing demand towards the lower price points of the market, with lower quartile values leading the growth trend across every capital city except Darwin and Canberra,” according to CoreLogic’s report.

“At a combined capital city level, lower quartile dwelling values are up 3.3% over the past three months, compared with a 0.8% increase in upper quartile values.”

That demand at the cheaper end of the market means unit values are now rising faster than houses across most capitals.  

“Most cities now have a median house value that is at least 1.5 times higher than the median unit value,” Tim Lawless says.

“With stretched housing affordability, lower borrowing capacity and a lift in both investor and first-home buyer activity, it’s not surprising to see the unit sector outperforming for a change.” 

PropTrack’s July 2024 Home Price Index:

REA Group’s PropTrack index uses metrics different from CoreLogic, basing its figures partly on prices of advertised properties rather than just implied home values.

Its survey finds national dwelling prices increased just 0.08% in the last month to be 6.3% higher than a year ago, but notes that “July is on average the slowest month for property price growth in the calendar year.”

The survey finds that the capitals “outpaced regional markets, which recorded the first monthly price fall (-0.12%) since late 2022,” while the cities put on 0.15% during July.

“Perth (+0.88%), Adelaide (+0.58%), and Brisbane (+0.34%) maintained the highest rates of price growth in July, with each of these capitals posting double-digit growth over the past year

and red-hot Perth hitting annual growth of 22.8%,” Paul Ryan, Senior Economist at PropTrack says.

Sydney reached a new median price record of $1,118,000, with prices up a further 0.12% in July. 

Prices in Australia’s most expensive city are now up 6.1% over the past year and 4.8% higher than the peak recorded during the pandemic.

It’s a different story in Melbourne, which PropTrack says is 4.4% below the early 2022 price peak.

The median home price in the Victorian capital fell 0.21% in July to $803,000, the fourth consecutive monthly fall. Overall, prices are 0.82% lower than a year ago.

On PropTrack’s figures, Melbourne and Adelaide medians are further apart than on CoreLogic’s calculations ($33,000 as compared to $5,352), but if Melbourne prices continue to ease while Adelaide steams ahead, it’s possible the City of Churches will bypass the Victorian capital in the next few months.

Paul Ryan puts Melbourne’s price growth performance down to “a stronger flow of new property listings and higher construction rates contributing to slower price growth”, while CoreLogic’s Tim Lawless highlights “what seems to be relatively low confidence, which might be a symptom of the higher taxation environment (in Victoria).”

The price growth “heat maps” that accompany PropTrack’s monthly Home Price Index release also back up CoreLogic’s claim that there’s much larger growth in affordable areas of cities than wealthier areas.

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Adelaide is a good example, with higher growth in the city’s affordable north.

The outlook:

PropTrack’s Paul Ryan says that despite the mixed picture across the nation, he’s still expecting home prices to keep increasing over the coming month, although he notes “the pace of price growth is likely to remain modest as uncertainty about the path of interest rates and affordability challenges constrain buyers’ budgets.”

CoreLogic’s Head of Research, Tim Lawless, is also cautious.

“While constraints on new housing supply are likely to keep a floor under home prices and remain a feature of the market for some time yet, downside risks are growing,” he says, noting that “housing affordability is becoming more challenging in markets where values are rising faster than incomes.”