Home price growth slowed in the final months of 2024
The Australian housing market closed 2024 with varied trends in lending activity, according to the latest figures from the Australian Bureau of Statistics. While the total value of new housing loans rose by 1.4% in the December quarter, the number of new loan commitments fell by 0.4%.
According to PropTrack senior economist Eleanor Creagh (pictured), this divergence highlights shifting dynamics in the market as affordability constraints and sustained high interest rates weighed on potential buyers.
Home price growth, which had been resilient earlier in the year, slowed in the final months of 2024. The decline in activity extended into early 2025, with small price drops observed in recent months.
Despite the quarterly dip in loan commitments, the annual picture reveals stronger growth. Over the year to December 2024, the total number of housing loans increased by 7.2%, while the total value climbed 16%. However, these figures mark a slowdown compared to the September quarter, when annual growth in value reached 24.7%. Much of the annual increase can be attributed to rising average loan sizes, driven by higher property prices.
Owner-occupiers contributed significantly to the December quarter’s growth in loan value, which rose by 4.2%. The average loan size for owner-occupiers hit a record $666,000, up $25,000 for the quarter. The number of loans in this segment grew by 2.2%, or 1,824 loans, compared to the previous quarter, and ended the year 4% higher than in December 2023.
Conversely, investor lending showed signs of cooling. The value of new investor loans fell by 2.9% in the December quarter, following a record high of $33.4 billion in the previous quarter.
The number of investor loans also declined by 4.5%, or 2,293 loans. Still, the average investor loan size reached a new high of $674,000, up $25,000 for the quarter and $49,000 year-over-year.
Investor activity over the full year remained strong, with the total value of new loans rising 22% annually. This growth was supported by rising rents and increasing property prices, which attracted investors back to the market throughout 2024.
As 2025 progresses, Creagh noted that market sentiment may shift if interest rates begin to decline. Expectations of rate cuts have already improved buyer confidence, with Westpac’s February consumer sentiment survey showing a 6.5% rise in house price expectations – the first increase since October 2024. Auction clearance rates have also risen across all capital cities compared to late last year.
Meanwhile, Creagh observed that if the Reserve Bank of Australia initiates a rate-cutting cycle, borrowing capacities and buyer activity could rebound. However, with housing affordability at its worst level in three decades, the extent of any price recovery may be more subdued compared to prior cycles of monetary easing.
Could interest rate cuts reignite demand, or will affordability challenges continue to weigh on the market? Share your insights in the comments.
