However, the pace of growth has slowed
In June, the Australian housing market displayed further signs of recovery, with CoreLogic's national Home Value Index (HVI) reporting a 1.1% increase. This marks the fourth consecutive month of positive growth, although the pace has slightly moderated compared to May's 1.2% gain.
Since hitting a bottom in February, housing values at the national level have rebounded by 3.4%. However, the market still remains 6% below the peak levels recorded in April 2022, CoreLogic reported. To put it into perspective, the median dwelling value is currently sitting at -$45,771 below the peak value of $768,777.
With the exception of Hobart, which experienced a marginal decline of 0.3%, dwelling values in all capital cities saw an increase in June. Tim Lawless (pictured above), CoreLogic's research director, said that Sydney continues to lead the market's recovery.
“Sydney home values increased another 1.7% in June, taking the cumulative recovery since the January trough to 6.7%,” Lawless said. “In dollar terms, Sydney’s median housing values are rising by roughly $4,262 a week.”
Sydney's housing values climbed by 1.7% in June, contributing to a cumulative recovery of 6.7% since the trough in January. In monetary terms, this translates to an astonishing rise of approximately $4,262 per week in Sydney's median housing values.
A crucial factor contributing to the upward pressure on housing values is the limited supply available in the market.
“Through June, the flow of new capital city listings was nearly -10% below the previous five-year average and total inventory levels are more than a quarter below average,” Lawless said. “Simultaneously, our June quarter estimate of capital city sales has increased to be 2.1% above the previous five-year average.”
While the overall housing market demonstrated a broad-based upswing, the pace of growth across most capital cities eased in June. Lawless suggests that this slowdown could reflect a change in sentiment as expectations of higher interest rates come into play. The combination of rising interest rates and lower sentiment is expected to impact the number of active homebuyers, ultimately helping to restore the balance between demand and supply.
Regional markets
In addition to the capital cities, regional housing markets also experienced an increase in values, although at a more subdued pace compared to the major urban centres. The combined regional index recorded a fourth consecutive month of growth, with housing values rising by 1.2% compared to the recent low observed in February.
Lawless attributes the slower growth trend in regional areas to recent shifts in demographic factors.
“After regional population growth boomed through the worst of the pandemic, internal migration trends have normalised over the past year, resulting in less housing demand across regional markets,: he said. “Additionally, housing demand from overseas migration is skewed towards the capital cities rather than the regions.”
One noteworthy exception is regional Victoria, which remains the only rest-of-state market where quarterly housing value trends remain negative, CoreLogic reported. In June, regional Victoria saw a 0.4% decline, resulting in a 1.3% decrease over the quarter. Lawless suggested that this weaker performance could be linked to a normalisation of migration flows, with more regional residents moving to the cities. Additionally, the affordability gap between regional Victoria and Melbourne has significantly narrowed during the recent upswing.
Despite the recent improvements, most regions are still below their recent cyclical highs in housing values, according to CoreLogic. Hobart has experienced the largest cumulative decline, with housing values remaining 12.9% below the record high achieved in May last year. In contrast, Perth is the only capital city where home values have reached new record highs, recovering from a relatively mild 0.9% decline during the downturn. Adelaide is also close to its record high, with home values only 0.3% below the peak and expected to reach a new high point in July.
Among the regional markets, regional NSW has witnessed the largest drop in housing values from peak to the end of June, with values down by 9.6%. This is followed by regional Victoria (-8.4%) and regional Tasmania (-7.2%). However, regional South Australia and regional Western Australia have bucked the trend and achieved new cyclical highs in June, indicating positive market conditions throughout the rate hiking cycle.
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