Affordability challenges and rising stock weigh on growth
Australian home prices declined slightly in January as capital city markets softened and the pace of value growth in regional areas eased, according to data from CoreLogic and PropTrack.
CoreLogic’s Home Value Index edged down 0.03% nationally, with a 0.2% drop across the combined capital cities. In contrast, regional dwelling values rose 0.4%, reaching new record highs.
Similarly, PropTrack’s Home Price Index showed a 0.08% decline nationwide, with capital cities falling 0.16% while regional prices inched up 0.12%.
Melbourne recorded the steepest decline in January, down 0.6% according to CoreLogic and 0.3% based on PropTrack data. Sydney values dropped 0.4% and 0.21%, respectively. Canberra also saw declines of 0.5% (CoreLogic) and 0.10% (PropTrack), while Hobart prices were flat in the CoreLogic index but down 0.46% in PropTrack’s assessment.
Brisbane and Perth continued to see price gains, though the rate of growth has slowed. CoreLogic data showed Brisbane prices rising 0.08%, while Perth values were flat. Over the past year, Perth (+15.38%), Adelaide (+12.41%), and Brisbane (+10.44%) have been the strongest-performing capital cities, according to PropTrack.
“Perth is now recording a slower rate of growth than Brisbane and Adelaide over the rolling quarter,” said CoreLogic research director Tim Lawless (pictured above left). “In the June quarter of 2024, growth in Perth home values was 7.1%, easing back to just 1.0% growth in the three months to January.”
Despite the recent slowdown, home values remain significantly higher than pre-pandemic levels. National prices have climbed 45% since March 2020, according to PropTrack. However, affordability constraints, weaker economic conditions, and a rise in housing stock for sale have weighed on price growth.
“National home prices fell in January, as the softer end to 2024 carried over into the new year, “said Eleanor Creagh (pictured above right), senior economist at REA Group. “This softening in growth has occurred alongside a surge in stock for sale, giving buyers more choice and reducing the urgency to transact.”
Annual growth in home values has slowed from a peak of 9.7% in early 2024 to 4.3% in January, according to CoreLogic. Regional Victoria was the only broad regional market to record an annual decline (-2.6%). PropTrack data showed annual growth in regional areas (+4.47%) outpacing capital cities (+3.56%).
Looking ahead, experts suggest the recent downturn could be short-lived.
“Lower mortgage rates and a subsequent lift in borrowing capacity as well as an undersupply of newly built housing could be setting the foundations for a relatively shallow housing downturn,” Lawless said. “But the easing cycle for interest rates is likely to be a gradual one, and we also have the ongoing headwinds of affordability constraints, normalising population growth and generally soft economic conditions to contend with.”
Creagh also pointed to potential support for prices as interest rates decline.
“As interest rates move lower this year, boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth,” she said. “However, the stretched starting point for affordability will likely dampen the uplift in prices compared to prior easing cycles.”
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