National property prices continue their record breaking run

Property prices have continued their unbroken run of gains for a 14th consecutive month, mirroring the previous month by rising another 0.6 per cent in March.

Property owners in every capital city except Darwin are wealthier, on paper at least, with the national home value index (HVI) increasing 10.2 per cent since November last year or, in dollar terms, by approximately $71,832.

The smaller capitals of Perth, Adelaide and Brisbane continue to lead to the capital growth charge, up 1.9, 1.4 and 1.1 per cent respectively.

The national quarterly pace of growth has accelerated from 1.4 per cent in Q4 last year to 1.6 per cent in Q1 2024.

An undersupply of properties in the face of growing populations continues to prop up prices nationally.

Although housing values are rising faster than at the end of last year, the quarterly trend of growth has halved relative to the middle of last year when home values were rising 3.3 per cent quarter-on-quarter, according to CoreLogic’s Research Director, Tim Lawless.

“Rate hikes, cost of living pressures and worsening housing affordability are all factors that have contributed to softer housing conditions since mid-last year, however, an undersupply of housing relative to demand continues to keep upwards pressure on home values despite these headwinds,” Mr Lawless said.

“The diversity in housing value outcomes can be explained by significant differences in factors like housing affordability, demand-side pressures from population growth and shortcomings in housing supply.

“Focusing on the extreme growth conditions in Perth, despite such a rapid pace of capital gains, housing values remain relatively affordable compared with the larger capital cities.

“Housing remains in short supply and purchasing demand is still high due to interstate and overseas migration rates that are well above average.”

Regional housing markets are also recording a rise in values, with similar levels of diversity as their capital city counterparts. Regional Victoria stands out with the softest growth conditions, with values down 0.3 per cent in the first quarter of the year; the only broad ‘rest of state’ region to record a decline in values in the year-to-date.

Eleanor Creagh, Senior Economist, PropTrack, said prices in capital cities have outpaced regional areas this year to date, with Perth the standout in recording its strongest gains since 2010.

“The home price upswing persisted in March, and prices reached a record high nationally.”

Despite an increase in the number of homes hitting the market this year, demand has absorbed the surge leading to further price increases.

“As was widely expected, the Reserve Bank kept the cash rate on hold at 4.35 per cent in March and many expect the next move for interest rates will be down, though timing remains uncertain.

“The expectation that interest rates may begin to move lower in late 2024 will sustain buyer and seller confidence.

“Housing demand is also being buoyed by population growth, tight rental markets, resilient labour market conditions and home equity gains, and meanwhile the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing.

“The imbalance between supply and demand is likely to further offset the impact of affordability constraints and a slowing economy, and as a result prices are expected to remain on the rise in the months ahead,” Ms Creagh said.

Sydney property prices continue to rise in the face of the nation’s highest median prices by a long way.

Despite an uplift in new listings hitting the market in Sydney, buyer demand has absorbed some of that increase with prices rising further.

Following a period of slower home price growth during the holidays, growth has reaccelerated with prices rising 1.79 per cent in the first quarter of this year, the strongest quarterly growth since the three months to September 2023, according to PropTrack.

Melbourne home prices lifted 0.27 per cent in March, according to PropTrack, bringing them up 1.71 per cent year-on-year, the strongest annual growth since June 2022. Even so, prices in Melbourne remain 3.35 per cent below their peak in March 2022. The price recovery in Melbourne is lagging behind Sydney and Brisbane but remains ahead of Hobart and Canberra, with prices up 2.30 per cent from their January 2023 low.

Sydney property prices unstoppable

Discussing the Sydney property market, buyers agent Michael Martin, of Investment Window, told API Magazine that prices most likely have not peaked, despite being so much higher than the rest of the country.

“We expect the slow and steady ‘grind’ to keep going higher.

“One of the main influences in the property market is confidence and sentiment.

“The RBA increased the cash rate a lot over the past 18 months and they have now paused, and all signs are that the next move will be lower and this will be the main driver of upward price movement in 2024.

“People are less likely to purchase, upgrade houses or invest if they do not have confidence in their ability to repay their loan, and this takes into account not only interest rates but also job security.

“People listen to the media and the narrative is turning positive and this will have people who have been sitting on the fence come back to the market, which we are already seeing.

“What is less discussed is how much the rate rises have absolutely crushed the supply pipeline and the feasibility of future projects. 

“The increase in build costs, coupled with the funding rates of these large projects/buildings has increased the hurdle rates on new builds to levels far beyond the market prices of existing stock,” Mr Martin said.

“Outside of luxury markets, it is very difficult for the average buyer to justify the premium, and uncertainty of a new build. 

“As a result, a lot of the demand that would otherwise be increasing supply is bidding on existing stock driving up prices in the faces of interest rate rise.”