Last updated: 15th Jun 2024
The Australian property market is still growing, with property prices and rents continuing to increase as supply shortages continue to worsen.
Nationally, residential real estate is a $10.6 trillion market and Australian property prices have increased by almost 9% in the 12 months to May 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 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 there’s 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 April. |
| More successful auctions and higher asking prices could indicate a stronger sellers market. |
| 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 15th consecutive month, Australian house prices rose in April 2024, with house prices up 11.1% since January 2023, according to data from CoreLogic.
Property prices grew 1.8% in the three months to April, 2024.
In the 12 months to April 2024, property prices across Australia increased by 8.7%, with Australian capital cities seeing a collective gain of 9.4% and regional areas experiencing a 6.4% increase.
There’s evidence of a multi-speed market with Perth, Adelaide and Brisbane leading the gains:
- Sydney house prices increased by 0.4% over the previous month, and 1.1% for the quarter.
- Brisbane’s house values increased 0.9% since March, and 3.3% over the quarter.
- Adelaide property values lifted by 1.3% over the month, and 3.3% in the quarter.
- Perth property prices jumped 2.0% over the month, and a considerable 6% for the quarter.
- Hobart dwelling prices rose by 0.3% in the month and a modest 0.8% for the quarter.
- Darwin’s house prices increased by 0.6% in April but just 1.0% over the quarter.
- Canberra property values saw a modest lift of 0.2% for the month and 1.0% for the quarter.
- Melbourne house prices declined by 0.1% and were flat over the quarter.
Did You Know?
The median value of a dwelling in Australia is now $779,817. Sydney remains the most expensive housing market, with a median property value of $1.14m.
CoreLogic’s daily home value index snapshot of capital growth in properties in the five largest capital cities, shows that as of May 30 2024:
- Sydney house values have increased 7.1% since May last year.
- Melbourne property prices grew slowly for a 1.9% year-over-year gain.
- Brisbane and the Gold Coast saw a 15.3% increase in home values since May 2023.
- Adelaide property values increased 14.7% for the year.
- Perth house prices jumped by 21.8% 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 all capital cities, bar Hobart, seeing stronger growth in unit prices in the three months to April.
PropTrack, which is part of the REA Group that also runs the realestate.com.au website, has different figures for Australian property prices in April 2024, putting the gains at just 0.23% for the month and 6.60% year-on-year.
Important!
However, its data also shows unit prices lifted by more than house prices, except for in regional areas where units saw negative growth of -0.02%.
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.
Weekly clearance rate data shared by CoreLogic on May 27 revealed a preliminary clearance rate of 71.5%, higher than the previous week’s final rate of 65.4%.
The total number of auctions was roughly steady from the week prior at 2,163, but significantly higher than the same time in 2023 (1,887 auctions held).
Important!
New auction listings are almost 7% above the previous five-year average.
Property Listings And Asking Prices.
On the supply side, there was a decline in homes being listed for sale and an increase in asking prices in April 2024. Property listings nationwide declined 6.4% in the month of April.
However, SQM Research finds that in the in the 12-months from March 2023 to 2024:
- Property listings nationally increased by 5.6%.
- Sydney and Melbourne property listings increased by 12.8% and 17.7%.
- Listings dropped in Brisbane, Perth and Adelaide.
In Perth—the capital that’s experienced the largest house price rises this year—saw a 27.4% decline in listings over the year.
Managing Director of SQM Research, Louis Christopher, said listings have been returning to their normal long-term average after recent years of acute shortages.
He thinks prices could fall in large capital cities in the second half of 2024 as caution builds.
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 28 May 2024:
Rental Affordability Plunges To Worst Level On Record.
Vacancy rates are still tight.
But the pace of rent increases in capital cities has been slowing in 2024, lifting by 1.2% in Feb-Mar, 1.3% in Mar-Apr, and just 0.5% in the 30 days to the 12th of May.
According to CoreLogic data, rents have risen 8.5% over the last 12 months, with the growth primarily being seen in house rents and rentals in regional areas.
In terms of yields, investors are benefitting from the highest result since October 2019 — with gross yields of 3.75% in April 2024.
What’s Next For The Australian Housing Market In 2024?
Forecasts for Australian house prices in 2024 include:
- Domain predicts the housing market will rise by 5%-7% nationally, with Sydney’s median house price set to lift the highest amount at up to 9%.
- ANZ research predicts a slightly cooler 4%-5% growth in Australian property prices over 2024, down from a previous estimate of 6%.
- 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.
Many economists are now saying rate cuts won’t come this year. Inflation figures disappointed for the March quarter, rising 1.0% to record a 3.6% annual rise in prices.
Important!
Fuelling concern, the monthly CPI indicator figure for April showed an annual rate of inflation of 3.6%, which is 1.0% higher than the monthly result for March.
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’ll receive when Stage 3 tax cuts take 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 be able to benefit from increasing property prices and rental yields, both now and long-term, provided you can afford to take on the debt, you choose the right property, and you can withstand market shocks including additional interest rate rises.
Jody
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Reg Watson says:
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