Turtles and hares: Perth, regional areas power on as price rises slow elsewhere

Australia’s property market is becoming increasingly two-speed, with Perth, Adelaide and Brisbane recording strong monthly property price rises while other cities are seeing more modest gains.

In Melbourne’s case, the latest CoreLogic Hedonic Home Value Index has median dwelling values going backwards (-0.1 per cent), compared to Perth’s huge 2.0 per cent monthly gain.

April’s national 0.6 per cent increase takes the current growth cycle into its 15th month, with housing values up 11.1 per cent, or approximately $78,000 since the trough in January last year.

The pace of gains was on a par with the month-on-month rises recorded in February and March, adding approximately $4,720 to the national median dwelling value.

Regional markets have shown a slightly stronger quarterly growth rate over the past five months than their capital city counterparts, following a 10-month period where the combined capitals index was outperforming.

Looking at value movements over the past three months, the strongest regional markets were aligned with the strongest capital cities. Regional WA (5.3 per cent) led the pace of gains, followed by Regional SA (3.9 per cent) and Regional Queensland (3.2 per cent), while Regional Victoria (-0.1 per cent) was the only rest of state market to record a decline in values over the rolling quarter.

Record property prices

Tim Lawless, CoreLogic’s Research Director, saw no imminent end to Perth’s helter-skelter pace of property price hikes but indicated Brisbane’s rapid capital growth rates may be easing.

“We aren’t seeing any signs of heat coming out of the Perth housing market just yet, in fact the quarterly pace of growth, at 6.0 per cent, is approaching the cyclical highs seen during the pandemic when interest rates were at rock bottom,” he said.

“On the other hand, we are seeing the pace of gains slow across the Brisbane market, easing below the 1 per cent mark to 0.9 per cent in April for the first time in 12 months.

“Affordability pressures may be impacting the pace of growth across the city, following a nearly $300,000 increase in values since the onset of Covid in March 2020, the largest dollar value increase of any capital.”

PropTrack’s monthly Home Price Index had national property prices rising in April at a more modest 0.23 per cent, but similarly found that Perth (0.83 per cent) and Adelaide (0.55 per cent) were performing the strongest as Melbourne (-0.10 per cent) and Hobart (-0.24 per cent) went backwards.

Eleanor Creagh, Senior Economist, PropTrack, said national home prices hit a new record in April, as strong buyer demand has outpaced the rise in new listings this year.

“While demand remains robust, the pace of price growth is beginning to slow.

“The stable interest rate environment has been a driver of confidence among buyers and sellers.

“Higher than expected inflation in the March quarter has pushed back the expected timing of rate cuts but most expect that the next move for interest rates will be down although the timing remains uncertain.

“Strong population growth, tight rental markets, low unemployment and home equity gains are stimulating housing demand, meanwhile, the supply side of the housing market has fallen short in responding to substantial demand.”

Ms Creagh said building activity is at decade low levels, exacerbating the housing supply shortage and adding to continued upward price pressure.

“Despite some easing in population growth, this mismatch between supply and demand is expected to persist in mitigating the downward effects of affordability challenges and a decelerating economy and, as a result, prices are expected to remain on the rise in the months ahead.”

The main driver of the recent rise of house prices has been widely acknowledged as being due to very strong demand at a time of a low supply, with population growth outweighing the dampening demand impacts of high interest rates.

At the same time new supply has been limited by a range of factors, including the high cost of land and materials, shortages of skilled labour and the high number of bankruptcies amongst builders.

More affordable outer suburbs are delivering the strongest price growth.

“The shift towards stronger conditions across lower value markets can also be seen between the housing types, with growth in unit values outpacing house values over the past three months,” Mr Lawless said.

“Hobart was the only city where houses recorded a larger gain than units over the past three months.”

Melbourne’s market weakness

The average price of a Melbourne standalone house is the lowest it has been against its Sydney equivalent in around 20 years.

BOQ’s Chief Economist, Peter Munckton, said the underperformance of the Melbourne market might reflect the greater stock of housing available for sale in the Melbourne market relative to, say, Brisbane and Adelaide.

“Investor demand has also been stronger in Adelaide and Brisbane (owner occupier demand has been low in all states although it has been stronger a little more robust in Adelaide) but the demand-supply dynamics in Sydney don’t appear that different to Melbourne.

“Perhaps the reason is what has happened to the number of people per household.

“That number declined over Covid, particularly in Melbourne.

“The rise in rents at a time of the general high cost of living will lead to a number of people either having to move into a group house or move back home and that could be playing a role of reducing demand by more in Melbourne than in some of the other cities,” he said.

It wasn’t all bad news for those cities underperforming at the moment.

Mr Munckton said the likelihood of rate cuts should provide support for decent house price growth nationally in 2025.

“Growth is likely to strongest in the markets that have seen the lowest growth over the past couple of years, namely Melbourne, Hobart, Canberra and Darwin,” he said.

Home sales look to have moved through a cyclical peak in November last year. Although the monthly trend in home sales is highly seasonal, the less seasonal six-month trend has remained relatively flat since the November rate hike. Estimated sales over the past three months are tracking 8.6 per cent higher than at the same time last year, and about 5.1 per cent above the previous five-year average.

Nationally, rents were up 0.8 per cent in April, a slightly lower rate of growth relative to February and March when the national rental index rose 0.9 per cent and 1.0 per cent respectively.