Melbourne, Sydney put brakes on national property price growth
Perth and Brisbane are powering on but Melbourne and Sydney are putting a handbrake on national property prices that have reached record levels but are showing signs of slowing.
Melbourne’s property market has gone backwards, Sydney’s has slowed and the three smaller mainland capitals continue to power price growth nationally.
The latest CoreLogic national Home Value Index (HVI) released Friday (30 November) offer the first genuine hint that the heat may be coming out of the housing market’s latest burst of capital growth.
The HVI increase of 0.6 per cent in November was the smallest monthly gain since the growth cycle commenced in February.
Property prices still inched to their highest ever median dwelling value during the month and, since falling 7.5 per cent from a peak in April 2022 to a trough in January 2023, housing values have bounced 8.3 per cent higher over the past 10 months.
Perth was again the standout performer, notching up strong monthly growth of 1.9 per cent to take its annual growth rate to 13.5 per cent, eclipsing the annual growth rates of Brisbane (10.7 per cent) and Sydney (10.2 per cent).
The past few months have been dominated by Perth, Brisbane and Adelaide, while Darwin and Hobart have racked up more monthly declines to join Canberra as the capitals that have gone backwards over the past 12 months.
CoreLogic Research Director, Tim Lawless, said the three fast-growing cities continue to show remarkably low levels of advertised supply while purchasing activity is holding above average levels.
“This imbalance between available supply and demonstrated demand is keeping strong upwards pressure on housing values across these markets, despite the downside factors leading to weaker housing market conditions across the lower eastern seaboard,” Mr Lawless said.
Regional Australia’s housing values remain 1.8 per cent below the historic high recorded in May 2022, with Regional Victoria (-6.7 per cent) and Regional NSW (-5.5 per cent) recording the largest shortfall from record levels.
The gap, however, between regional and capital city growth rates has converged, with the combined capitals and regionals indices recording a 0.6 per cent rise in values in November.
Affordable suburbs still delivering
While the Melbourne Cup interest rate hike might have pulled the reins on some sections of the market, the price growth race is not over yet.
As the three aforementioned cities deliver strong gains, it’s the more affordable suburbs that are driving several of those fastest-growing markets.
The same picture is emerging in Sydney and Melbourne, where slower growth or even declines in suburbs sitting above the median dwelling value are more the norm, although not for the very top end of town, but outer suburbs are still delivering investors and home owners solid price gains.
Mr Lawless said slower growth conditions across the upper quartile of Sydney and Melbourne have become increasingly prominent, with the most expensive quarter of the market across both cities now recording the lowest rate of growth on a monthly and rolling quarterly basis.
“The more expensive end of the market tends to lead the cycles in these cities.
“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,” he said.
Speaking to API Magazine, PropTrack Senior Economist Eleanor Creagh countered that price growth in some inner-city areas has slowed but they are not flat and are still recording exceptionally strong growth.
“Markets in parts of WA, SA and Queensland continue to be the top-performing areas over the past year, recording growth in prices of 10 per cent or more.
“These markets have largely avoided the downturn in prices, due to a combination of factors: more affordable homes, population growth, and – particularly for Perth – very low stock on market.
“In Perth, the total number of properties currently listed for sale is at record lows.”
Ms Creagh said inner parts of Sydney had delivered stellar growth over the year.
“Within Sydney, inner city areas have the strongest rebound in prices compared to a year ago; that reverses the pattern seen earlier in the downturn, when more-affordable peripheral areas were holding up better.”
She added that interest rate hikes that might have sent prices spiralling downwards had been offset by other factors.
“Strong housing demand, buoyed by record net overseas migration, tight rental markets, low unemployment and home equity gains, has worked alongside limited housing stock to offset the impacts of higher interest rates this year.”
The property market, however, appeared unlikely to be taking a major downward turn any time soon.
“Despite interest rates climbing again in November and the flow of listings hitting the market increasing, housing demand has remained strong and national prices have now risen for 11 straight months.
“Looking ahead, price growth is expected to continue as the positive tailwinds for housing demand and a slowdown in the completion of new homes counter the sharp deterioration in affordability and a slowing economy, however, prices are likely to lift at a slower pace than they have across 2023,” Ms Creagh said.
New home building shows signs of life
New house building approvals increased by 1.2 per cent in the month of October, according to Australian Bureau of Statistics (ABS) data released Thursday (30 November).
But house approvals over the last three months are down by 11.2 per cent compared to the same quarter last year, and around the lowest levels of the last decade.
“The sharp rise in construction costs and labour and materials shortages had slowed the delivery of new builds, hampering the supply of new housing,” Ms Creagh said.
Decreases in house approvals in the three months to October compared to the same quarter last year were led by New South Wales (-18.0 per cent), followed by Victoria (-11.3 per cent), Queensland (-9.0 per cent), South Australia (-8.4 cent) and Western Australia (-0.6 per cent).
HIA Senior Economist, Tom Devitt, said that in 2024 home builders will be starting construction on fewer new houses than at any time in the last decade.
“The RBA’s interest rate increases will suppress home building and spending across the broader economy next year by much more than would have been necessary to get inflation over the line into the RBA’s 2-3 per cent target range,” Mr Devitt said.
The ABS data revealed just 55,029 dwellings were approved between July and October in 2023, compared with 65,599 over the same period in 2022.