Australia’s housing market is showing mixed results, with Perth, Adelaide, and Brisbane leading the charge while Melbourne, Hobart, and Canberra experience softer conditions. According to research by Eliza Owen, CoreLogic’s Head of Residential Research in Australia, the median dwelling value in Melbourne has now fallen behind not just Sydney, but also Adelaide and Perth—a significant shift in the nation’s housing landscape.
In August, national home values saw a modest increase of 0.5%, marking the 19th consecutive month of growth. However, the pace is clearly slowing, with a quarterly rise of just 1.3%, a sharp drop from the 2.7% growth observed in the same period last year.
Perth, in particular, recorded a substantial 2.0% increase in home values, followed by Adelaide at 1.4% and Brisbane at 1.1%. Melbourne, on the other hand, saw a decline of 0.2%, a trend that has persisted for six months. Ms Owen highlights that the surge in Perth and Adelaide could be challenging to sustain as affordability concerns grow, especially in the face of rising interest rates and increasing cost of living pressures.
“The housing values in mid-sized capitals like Perth, Adelaide, and Brisbane can’t keep rising indefinitely when affordability is stretched,” Ms Owen commented. She noted that these markets, which have recently outperformed others, might face a cooling off as economic pressures mount.
The research also shows that demand is increasingly being directed toward more affordable properties. The lower quartile of capital city dwellings, representing the most affordable 25% of homes, saw a 2.7% rise over the three months to August. In contrast, the upper quartile barely moved, increasing by only 0.3%. This shift towards lower-priced homes is also evident in the stronger performance of unit values compared to houses in several cities.
Interestingly, Perth’s median dwelling value has overtaken Melbourne’s for the first time since 2015, with Adelaide’s median also surpassing Melbourne’s. This change reflects a broader trend where less expensive markets are seeing more robust growth, driven by affordability constraints in traditionally higher-priced areas like Melbourne and Sydney.
Ms Owen pointed out that Melbourne’s market is being weighed down by several factors, including an increased tax burden on investment properties and a relatively high supply of dwellings. “Victoria has seen more dwelling completions over the past decade than any other state, which is keeping a lid on price growth,” she said.
As spring approaches, sellers need to be mindful of local market conditions. While overall stock levels remain low, some areas, particularly in Victoria and Tasmania, are seeing an accumulation of listings despite weaker price performance. This could affect sellers’ ability to achieve their desired prices if buyer interest does not pick up as expected.
On the rental side, there’s some relief in sight. The national CoreLogic rent index was flat for a second consecutive month in August, and Sydney even saw a slight decline. Annual rent growth is slowing across most capital cities, with only Hobart bucking the trend. This moderation in rent increases could be due to a combination of factors, including a dip in net overseas migration and a shift back towards shared housing arrangements as renters cope with high costs.
Looking ahead, the housing market is likely to see modest value increases through the end of 2024. However, the ongoing challenges in the residential construction sector, combined with tight labour markets and economic pressures, could limit significant gains. As Ms Owen noted, “The gap between what’s affordable and what’s available is widening, which may continue to narrow the buyer pool to wealthier households.”
For those planning to sell this spring, it’s essential to consider local conditions carefully. With varied performance across the country, understanding the dynamics of your specific market could be key to a successful sale.
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