Slow growth creates buyers’ market in largest capitals

Australian housing values have recorded their slowest month of growth since January 2023.

CoreLogic’s latest Home Value Index report shows values rising just 0.1% nationally in November.

While the medium-sized cities of Perth, Adelaide and Brisbane continue to provide much of the positive momentum, Melbourne, Sydney and Hobart can now be considered “buyers’ markets” with home buyers and investors now holding the upper hand over vendors.

The details

CoreLogic says national home values have grown for the 22nd straight month, despite the highest interest rate environment in more than a decade.

However, the data analytics company warns this could be the last month of positive growth in this cycle.

Melbourne recorded a 0.4% fall over the month, taking home values 1.0% lower over the last quarter and 2.3% lower over the past year.

CoreLogic believes the Sydney market may have peaked in August, with values flat in September and falling 0.2% in October and November.

“The mid-sized capitals, which have dominated the growth cycle of late, are also losing steam,” says CoreLogic’s Research Director, Tim Lawless.

Perth continues to lead the nation, with values up 1.1% over the month and 3.0% higher over the last quarter, however, Mr. Lawless says this was the softest rise over a rolling three-month period since April 2023.

Similarly, Brisbane’s quarterly rate of growth has eased back to 1.8%, the slowest pace of gains since March 2023, while Adelaide’s 2.8% rise in values over the past three months was the smallest outcome since June 2023.

Outside of the capitals, regional housing trends have been a little stronger, according to CoreLogic, with the combined regional index rising 1.1% over the past three months.

A key to the weaker price growth has been a noticeable increase in for-sale listings.

“Sydney and Melbourne listings are now tracking 10.4% and 9.1% above their previous respective five-year averages, to be at their highest level for this time of the year since 2018,” according to CoreLogic, moving the scales firmly in the favour of property buyers in those cities.

“With more available supply and less purchasing activity, selling conditions have deteriorated through spring,” Tim Lawless says.

The outlook

Tim Lawless indicates expected interest cuts next year from the Reserve Bank of Australia could see growth pick up.

“A lower cash rate will be a positive factor for housing markets,” he says.

“Lower mortgage rates will provide a lift to borrowing capacity, and, along with lower inflation, should see an improvement in serviceability assessments and see a further rise in consumer sentiment.

“A couple of rate cuts might be enough to shore up a declining trend in home values, but it is hard to see any material upward pressure returning until interest rates reduce more substantially and affordability barriers are less formidable.”

However, CoreLogic’s Home Value Index report notes that “there may be some exceptions emerging through 2025, with the Westpac-Melbourne Institute consumer sentiment findings recording an increase in buyer confidence across Victoria.”

Mr Lawless also points to the continuing undersupply of newly built housing in the face of still strong population growth, saying it’s “likely to provide some support for housing values.

“The residential construction sector continues to face feasibility hurdles in getting new housing stock to market, with materials and labour costs having surged over the past five years.

“Construction costs aren’t rising as rapidly as they were through the pandemic, but they are still increasing at around 1% a quarter,” he says.

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The other view

CoreLogic uses a complicated computer algorithm to predict the nominal values of every Australian home, measuring them on a daily, monthly, quarterly and yearly basis.

Other data analysts base their calculations on sale prices.

One of these is former Domain Group Chief Economist Dr Andrew Wilson, who now runs his own data company, My Housing Market.

Andrew Wilson’s data for November still shows solid monthly price growth in Sydney, particularly in the city’s house market.

His data also shows a slower easing of prices in Melbourne.

“National home prices are set to conclude 2024 on the rise, driven particularly by the boomtime markets of Brisbane, Adelaide and Perth.

“Sydney will continue to report solid results with higher-priced regions concluding the year on the rise,” but he says Melbourne “remains in the doldrums with inner-suburban prestige markets continuing as clear local regional underperformers.”

Dr Wilson says “underlying drivers will continue to support housing market activity with the spectre of higher interest rates easing” and “continuing high migration over the shorter-term will add to current chronic housing undersupply supporting high rents and low vacancy rates in capital city rental markets.

“High rents and higher prices generally ... are providing clear incentives for first home buyers and particularly investors chasing solid investment returns,” he says.