National property prices at all time highs, house median hits $1 million

The downward pressure on interest rates and affordability restraints are locked in an arm wrestle within the Australian property market.

National home prices rose another 0.4 per cent in March, according to data released Tuesday (1 April) by CoreLogic.

Record property prices in many parts of the country mean affordability is at its limit for many prospective buyers, but the latest interest rate cut and the expectation of more to come in 2025 is contributing to a return to capital growth.

March’s upturn marked a second consecutive month of growth in the national index, following a short three-month decline where values dipped 0.5 per cent. Those losses have been erased.

Darwin has staged a significant turnaround to lead the median dwelling value increases for the month, up 1.0 per cent, followed closely by Adelaide (0.8 per cent).

The mid-sized capitals have been the powerhouses of the property market for the past two years but that pace of gains has slowed noticeably, especially in Perth.

Perth home values have, however, still led the five-year upswing among the capitals, rising 75.4 per cent since March 2020. Hobart was the only capital to record a fall in median dwelling value in March.

Tim Lawless, Research Director for CoreLogic (which will soon rebrand to Cotality), said Sydney and Melbourne, which have the largest weighting in the Home Value Index, look to have turned a positive corner, with values across both cities rising over the past two months.

“Improved sentiment following the February rate cut is likely the biggest driver of the turnaround in values, along with the cut’s direct influence of a slight improvement in borrowing capacity and mortgage serviceability,” Mr Lawless said.

A return to the huge price increases seen in some markets in 2024 and previous years appears unlikely to eventuate, he added.

“On the price upside, a gradual easing in monetary policy, cost of living relief, income growth, tight labour markets and improved sentiment are all likely to support housing sector activity.

“On the flipside, a variety of headwinds are likely to at least partially offset the tailwinds, keeping value growth contained.

“The rate-cutting cycle is likely to be drawn out, housing remains unaffordable, population growth has reduced to more normal levels and housing credit policies remain risk averse.”

Eleanor Creagh, REA Group Senior Economist, also suggested price rises throughout the rest of 2025 would be more modest than the past few years.

“February’s rate cut boosted borrowing capacities and buyer confidence, helping to reignite demand and reverse the small price declines seen in the months prior.”

Citing PropTrack’s price movement data, which showed a March increase 0.27 per cent nationally, Ms Creagh said market sentiment has improved and buyers who had delayed purchasing decisions due to the sustained higher interest rate environment are likely re-entering the market.

“Population growth remains strong – though it is beginning to moderate – and Australia continues to face a significant shortage in new home completions, however, stretched affordability remains a major challenge and will only improve gradually, given the modest and measured rate reductions expected ahead.”

Population growth in the September quarter was back to 0.4 per cent, on par with the pre-Covid decade average. The slowdown has been driven by a sharp drop in overseas migration following its peak in the first quarter of 2023. As of September 2024, quarterly net overseas migration numbers have reduced by 46 per cent.

“We expect prices to keep lifting over the coming months, but the rate of growth is likely to be more modest compared to recent years,” Ms Creagh said.

“With affordability still a major constraint, the impact of further rate cuts will be somewhat tempered.”

Even though population growth is easing, the cumulative undersupply of housing will take some time to address.

Mr Lawless said housing construction costs are still rising from an already high base, creating ongoing feasibility challenges for builders and developers and the competition for trades with the infrastructure sector is likely to persist for several years at least.

Low supply is another factor that could support further value growth, he added.

Even a bullish prediction of three 0.25 per cent rate cuts this year would be unlikely to cause a stampede back into property.

“Until home loan serviceability improves more substantially, it’s hard to see housing markets moving into a material growth trend,” Mr Lawless said.

Median house price above $1 million

The national median price for houses has risen to an eye-watering $1,058,442, driven by Sydney’s markedly higher prices than the rest of the country.

This was evidenced by the fact the national average is dragged above the $1 million mark despite Sydney being the only capital with median house sales prices above that mark. Sydney remains the most expensive city for houses, with a median price of $1,645,444, which is 55.5 per cent higher than the national median.

According to the Real Estate Institute of Australia’s (REIA) Real Estate Market Facts, the national median price for other dwellings increased 0.8 per cent over the quarter to $690,138, with price gains in all capital cities except Melbourne, Hobart, and Darwin.

Sydney continues to command the highest median price for other dwellings at $812,863, 17.8 per cent above the national median, while Darwin remains the most affordable at $370,000, 46.4 per cent below the national median.

The national median price for other dwellings increased 0.8 per cent over the quarter to $690,138, with price gains in all capital cities except Melbourne, Hobart, and Darwin. Sydney continues to command the highest median price for other dwellings at $812,863, 17.8 per cent above the national median, while Darwin remains the most affordable at $370,000, 46.4 per cent below the national median.

Over the past year, the national median price for other dwellings has risen 4.8 per cent.

REIA President, Ms Leanne Pilkington said the latest results reflect the dynamic nature of Australia’s property market, where price and rent movements vary significantly across capital cities.

“While some markets experienced declines, strong growth in Brisbane, Adelaide, and Perth has contributed to overall stability.”

“As the property market navigates ongoing economic conditions, the REIA report underscores the varied performance across Australia’s capitals, with affordability and supply remaining key drivers of price and rent fluctuations.”