Last updated: October 22nd, 2024
The Australian property market is still growing, with property prices and rents continuing to increase as supply shortages continue to worsen. But the pace of growth has definitely slowed.
Nationally, residential real estate is a $10.6 trillion market and Australian property prices have increased by almost 7% in the 12 months to September 2024.
Inflation remains higher than the Reserve Bank of Australia (RBA) is comfortable with.
Rate cuts are not looking nearly as certain, meaning there will be little relief for borrowers trying to secure home loans. Yet demand is being buoyed by strong demand, tight rental markets and ongoing high levels of immigration.
Meanwhile, we’re seeing a decline in construction activity due to rising costs. Fewer houses and more people make for a hot property market.
| Key Takeaways: |
|---|
| Australian property values continue to rise nationally, but at a slower pace, with significant divergence in which localities are seeing stronger prices. |
| Capital cities, and especially Perth, Adelaide and Brisbane lead growth in the Australian housing market in the three months to September. |
| Auction clearance rates have softened in the key markets of Melbourne and Sydney as demand moderates. |
| Mounting downside risks for property prices include the ‘higher for longer’ narrative on interest rates and general weakening of sentiment due to sticky inflation and expected unemployment rises. |
Australian House Prices: Latest Data.
For the 20th consecutive month, Australian house prices rose in September 2024, but the momentum has shifted considerably.
House prices were up 1.0% nationally between July and September 2024, and just 0.4% month-over-month, according to data from CoreLogic.
In the 12 months to September 2024, property prices across Australia increased by 6.7%. Australian capital cities saw a collective gain of 1.1% for the quarter, and regional areas experienced a 1.0% increase over the three months.
There’s evidence of a multi-speed market with Perth, Adelaide and Brisbane leading the gains:
- Sydney house prices increased by 0.2% over the previous month, and 0.5% for the quarter.
- Brisbane’s house values increased 0.9% since August, and 2.7% over the quarter.
- Adelaide property values lifted by 1.3% over the month, and 4.0% in the quarter.
- Perth property prices jumped 1.6% over the month, and a considerable 4.7% for the quarter.
- Hobart dwelling prices fell by 0.4% in the month and was -0.8% for the quarter.
- Darwin’s house prices increased by 0.1% in September but fell to -0.7% over the quarter.
- Canberra property values saw a decline of 0.3% for the month and 0.9% for the quarter.
- Melbourne house prices declined by 0.1% month-over-month and were down 1.1% over the quarter.
Did You Know?
The median value of a dwelling in Australia is now $807,110. Sydney remains the most expensive housing market, with a median property value of $1.18m.
CoreLogic’s daily home value index snapshot of capital growth in properties in the five largest capital cities, shows that as of October 8, 2024:
- Sydney house values have increased 4.3% since October last year.
- Melbourne property have declined for a -1.6% year-over-year change.
- Brisbane and the Gold Coast saw a 13.7% increase in home values since October 2023.
- Adelaide property values increased 15% for the year.
- Perth house prices jumped by 24.1% over the year.
Important!
Australia’s property market has long been described as ‘bubble-like’ due to overvalued house prices, with dire predictions of crashes that haven’t played out. However, a deep and lasting downturn is definitely still possible.
The lack of supply and affordability issues around houses means demand is now tilting towards units and apartments, with six of the eight capital cities seeing stronger growth in unit prices in the three months to September.
Above: Bubble fears have subsided, thanks to RBA interest rate hikes.
PropTrack, which is part of the REA Group that also runs the realestate.com.au website, has different figures for Australian property prices.
Its most recent Home Price Index data for August 2024 puts the annual gains at 0.2% for the month and 6.2% year-on-year.
Important!
However, its data shows growth in unit prices wasn’t as strong as the growth in house prices — 0.1% monthly growth versus 0.3% — with units in regional areas experiencing negative growth of -0.3% in August.
By capital city, PropTrack data also indicates that Perth, Adelaide and Brisbane have witnessed the highest gain in the past year.
What’s The Latest Trend In Auction Clearance Rates?
A helpful tool for gauging interest from buyers is auction clearance rates.
That is the number of properties sold at auction in a given week as a percentage of the total number of properties listed for auction — anything above 70-75% usually indicates a seller’s market.
CoreLogic data tells the tale of weakening selling conditions:
- Auction clearance rates have decreased to the low 60% range across capital cities; and
- Private sale properties are staying on the market longer, with a median of 32 days in the September quarter.
Weekly clearance rate data shared by CoreLogic on September 30 revealed a preliminary clearance rate of 64.5%, the lowest clearance rate since December 2022.
Property Listings And Asking Prices.
Spring is known as “selling season”, and on the supply side, there’s been an uptick in homes being listed for sale.
Important!
CoreLogic says new listings coming onto the market are almost 9% above the previous five-year average for this time of the year, giving buyers more leverage.
However, SQM Research finds that total listings in September 2024 fell by 2.3% compared to August.
Over the 12-months from September 2023 to 2024, SQM Research indicates:
- Property listings nationally decreased by 0.7%.
- Sydney and Melbourne property listings increased by 7.9% and 7.2%.
- Listings dropped in Brisbane, Perth, Adelaide and Darwin.
- Canberra saw the highest increase in listings at 15.3%
Perth — the capital that’s experienced the largest house price rises this year — saw a 31% decline in listings over the year.
Managing Director of SQM Research, Louis Christopher, said listings are expected to rise in October and surge in November to levels above previous years.
He said a rise in asking prices — up by 0.7% nationally over the month — “has somewhat reversed out the falls in confidence by vendors recorded over winter”.
Important!
Asking prices can be predictive of how confident sellers are that they can offload a property based on the most current economic conditions and demand from buyers, which helps round-out a view of whether property prices will trend upwards or downwards.
Here is the latest data on asking prices as of 8 October 2024:
Rental Affordability Improves As Migration Eases.
Overseas migration has eased since record highs in 2023.
While vacancy rates are still tight, the pace of rent increases in capital cities has been slowing in the second half of 2024.
Sydney, Brisbane and Canberra saw a reduction in rents in the September quarter. Although most cities are still seeing annual rises well above the pre-pandemic average.
According to CoreLogic data, rental growth has eased to 7.2% over the last 12 months, compared to an annual trend peak of 9.7% in the 12 months to November 2021.
In terms of yields, investors are seeing toward pressure, with gross yields of 3.68% in September 2024.
What’s Next For The Australian Housing Market In 2024?
Forecasts for Australian house prices in 2024 include:
- Domain predicts that houses will increase in value by 3-6% nationally by the end of financial year 2025 (with a 2-4% rise for units).
- ANZ research predicts capital city house prices to rise by 7.3% by the end of 2024, slowing to 5.5% in 2025.
- AMP is also predicting price gains of around 5% throughout 2024.
- KPMG forecasts that home prices will increase by 9.4% between June 2024 and June 2025.
As AMP’s Shane Oliver highlights that “rate cuts are usually needed for upswings” in the Australian housing market, and the market has also been chronically undersupplied since the mid-2000s when immigration levels surged.
Oliver says the brief pandemic freeze on immigration helped, but worsened once borders reopened with record levels of immigration that pushed housing demand to around 250,000 dwellings per year at a time when home completions are around 170,000 per year.
Important!
Smaller households and the need for extra space at home for remote working are also contributing.
RBA’s chief economist Sarah Hunter says that while the population is increasing, the number of people living in each home is trending lower.
The disparity makes satisfying the demand for places to live even more difficult.
The housing shortfall largely explains the surprising strength of house prices given the high cash rate, but downside risks to prices include delays to rate cuts and a sharp rise in unemployment, Oliver says.
The RBA and many economists are now saying rate cuts won’t come this year. Monthly inflation figures came in at 2.7% in August, which the ABS said was the lowest reading since August 2021.
Important!
Annual CPI is 3.8% (3.9% trimmed mean), which is still a fair distance away from the RBA’s 2-3% target range. At its September meeting, the RBA said: “…our current forecasts do not see inflation returning sustainably to target until 2026.”
Prominent economists have also pointed to the inflation risks posed by stimulus measures in the Australian Government’s recent budget.
Chris Richardson said it could “poke the inflationary bear” because the subsidies and tax breaks would return cash to Australians equivalent of almost half the money the RBA removed through higher rates:
He said lower interest rates could be a long time coming if Aussies spend, rather than save, the bonus funds they received when Stage 3 tax cuts took effect in July.
Is Australian Property Still A Good Investment?
Property is generally an attractive option for Australian investors, primarily because the market is so resilient and continues to be supported through government policies.
But investing to a plan is always advisable, and that plan should ensure your financial position is solid and your assets are diversified enough to minimise risk.
You may benefit from increasing property prices and rental yields, both now and long-term, provided you can afford to take on the debt, choose the right property, and withstand market shocks, including additional interest rate rises.
Jody
Nelson says:
I attempted to use the “hack” to dodge conversion fees, but sadly after converting AUD to USD on a Wise account, there doesn’t seem to be a way to deposit that money into eToro; i.e. eToro recently disabled Wire transfers and Wise doesn’t support SWIFT transfers for sending USD to a bank in the US?
John Keys says:
CMC Invest are an abysmal in turning around new accounts.
Over 1 month to setup up an account with an investment trust, and still waiting. I was promised 5 business days.
Reg Watson says:
Given that China’s economy is going down the toilet how the heck do we expect an appreciation of the Aussie in 2024 ? We are tied to China.