The day Australian property broke its all-time price record
Australian property prices have hit a record high, driven largely by rapid price growth in Perth, Brisbane and Adelaide.
Australian property prices have hit their record high point, eclipsing the previous peak of April 2022.
CoreLogic’s national Home Value Index (HVI) on Wednesday (22 November) surpassed the national median dwelling price record of $768,777.
The new benchmark meant the national real estate market had erased the declines that saw prices hit a floor on 29 January this year. Since bottoming out, the national HVI has risen by 8.1 per cent.
Tim Lawless, Executive Research Director, CoreLogic, said it took around nine months for the national HVI to move from record highs to the recent trough, then roughly ten months to recover from the short but sharp downturn.
“The V-shaped recovery may seem counter intuitive, given high interest rates, deeply pessimistic levels of consumer sentiment and high cost of living pressures, however, the recovery can be explained by an imbalance between supply and demand,” Mr Lawless said.
“From a supply perspective, advertised stock levels have held remarkably low through 2023.
“Although inventory levels are now rebalancing as vendor activity picks up, listings remain 16.6 per cent below the previous five-year average nationally.
“At the same time, demonstrated demand, based on the volume of homes sales, is trending roughly in line with the five-year average.”
Sydney, Melbourne lagging smaller capitals
Perth, Adelaide and Brisbane remain the frontrunners in the national property price race to the top.
Each is at record highs along with the regional counterparts within their respective states.
At the other end of the scale is Hobart, where values remain 11.8 per cent below their peak and Regional Victoria, where dwelling values are 7.0 per cent below their record highs.
As housing values continue to trend higher across most regions, Mr Lawless said there was likely to be a return to record high housing values.
“While this is great news for home owners, for those looking to buy, affordability pressures are becoming more pressing amid rising values, high interest rates and worsening serviceability challenges.
“The good news for prospective buyers is that the pace of growth is clearly easing in some markets as advertised stock levels rise and purchasing demand remains fragile.”
CoreLogic Economist Kaytlin Ezzy said Tuesday that results across Australia’s largest 50 non-capital Significant Urban Areas (SUAs) vary, with 12 (8 in QLD, 2 in NSW and 2 in WA) recording new peaks in October, and an additional four sitting within 1 per cent of their previous record highs.
“Looking at quarterly value growth, WA’s Bunbury recorded the strongest rise, up 4.6 per cent over the three months to October, followed by NSW’s Lismore, and St Georges Basin – Sanctuary Point, up 4.3 per cent and 3.9 per cent respectively,” Ms Ezzy said.
Despite not taking out the top spot, NSW and Queensland were undeniably the best-performing states, each making up four of the top 10 positions in terms of quarterly value growth.
“In contrast, regional Victoria saw some of the largest quarterly declines, with dwelling values across Warrnambool and Ballarat falling 1.6 per cent and 1.5 per cent, respectively, while the coastal town of Batemans Bay in New South Wales (-6.9 per cent) recorded the largest annual decrease.
“These markets are now seeing weaker growth conditions after strong gains during the pandemic upswing,” Ms Ezzy said.
Large cities, smaller growth
While both enjoy strong population growth, Sydney and Melbourne’s more modest recent property price growth have been borne of different issues.
The median house price in Australia’s combined capital cities is now $923,641, while the median unit price is $647,148.
Sydney’s median dwelling value of $1,121,000 towers above the national average of $747,400. It’s that lack of affordability that is putting a cap on further price growth, particularly with wage growth still lagging well behind inflation.
Melbourne’s median dwelling value of $778,500 is bettered only by Sydney and Canberra ($821,400) but its limited price growth has been attributed more to an inhospitable regulatory environment than any affordability factors.
The scope for further property price increases is limited by Victorian wages that, at average weekly earnings of $1,896, are fourth among the states and territories and slightly below the national average.
It’s little wonder that investors are drawn to markets such as Perth’s, where better value can be had with a median dwelling value of $631,000 offering more bang for buck.
Gary Dunne, CEO of Victorian residential development agency RPM, said government was deterring investment in Victorian property and greenfield sites.
“Proposed changes to government policies have introduced an element of uncertainty for investors.
“Many are now exploring other markets,” he said.
Cost of living pressures were also proving difficult to overcome for many prospective buyers.
“Affordability and serviceability challenges persist, primarily due to household financial pressures, yet there is pent-up local demand bolstered by a strong return in migration that is motivating Victorians to explore property opportunities.
“However, the continued pressures stemming from the rising cost of living, most notably electricity, petrol, and rent, have seen more consumers exercise caution.”
The viability of the greenfield property market hinges on quick decision-making and the release of land to meet not only existing demand but also to accommodate growth in Melbourne’s corridors and regional centres.
Mr Dunne said current capacity is stretched and was in need of urgent intervention.
“While there is limited stimulus for home owners, developers and builders are actively engaging the market.
“Two primary drivers are at play here; first, there is the need to address the volume of titled stock on the market and the urgency to move it; second, there is the emergence of a relatively strong resale market where consumers are selling land they had previously purchased, often due to difficulties in obtaining financing for construction or general uncertainty surrounding the builder sector.
“Developers and builders are offering incentives and rebates ranging from 5 to 10 per cent, which are expected to continue through to the Christmas period.”