House prices are on track to continue rising across the country, propelled by renters and migrants wanting to buy their own homes and buyers trying to get in ahead of interest rate cuts expected later this year.
Data from CoreLogic shows that house prices rose nationally, up 0.4 per cent in the month of January (compared to 0.3 per cent in December), and 8.7 per cent across the year.
It marked the 12th straight month of value rises, with Perth (+1.6 per cent for the month), Adelaide (+1.1 per cent) and Brisbane (+1 per cent) leading the gains.
Sydney was up marginally (+0.2 per cent), while Melbourne (-0.1 per cent), Canberra (-0.2 per cent) and Hobart (-0.7 per cent) went slightly backwards.
Rents had their strongest monthly rise since April, up 0.8 per cent in January, following a 0.6 per cent rise in December.
The median price of a home is now $1.12 million in Sydney, $796,818 in Brisbane and $777,250 in Melbourne. The national median is $759,437.
But for those looking to break into the market, getting a home loan might be easier.
The Reserve Bank is expected to keep rates on hold at its next meeting thanks to the latest lower inflation read, and economists are tipping there will be rate cuts later this year.
CoreLogic’s head of residential research, Eliza Owen, says buyers are trying to get in ahead of expected rate cuts later in the year.
“The uplift that we’re seeing could be a reflection of an anticipation that interest rates have peaked,” she said.
But there was still “a mix of headwinds and tailwinds in store for the market”.
“Economic conditions are weaker, the savings rate is reduced, and consumer sentiment is low … but so far, the housing market … has continued to rise,” she noted.
“Nationally, we’re expecting house prices to rise in 2024, but probably at a slower rate than what we saw last year.
“I think at the higher end of the market, like Sydney, for example, … we would expect to see a slowdown in growth.
“We’re already seeing pretty mild growth rates and declines across markets like Canberra and Melbourne, where home values are also high.
“That comes back to limits associated with high interest rates. And the fact that even relatively high-income earners are seeing a limitation to their borrowing capacity or might just be deterred from the high interest costs associated with those home purchases.”
Ms Owen said the rental market would see continued price increases, “but possibly at a slower rate than what we saw in 2023”.
More buyers are opting for homes over units
House values have continued rising at a faster rate relative to unit values in January, with the gap between the median capital city house and unit values rising to a record high of 45.2 per cent in January.
Across the combined capitals, detached housing values rose by half a per cent during the month, adding about $4,800 to the median house value while units increased a smaller 0.1 per cent, or a $900 lift.
Despite worsening housing affordability, the volume of home sales has held slightly above average during the past three months.
CoreLogic estimates there were 115,241 dwellings sold over the three months ending January.
That’s 11.9 per cent higher than the same period last year and 0.5 per cent above the previous five-year average for this time of the year.
Ms Owen said Australians were willing to pay a higher premium for a detached home.
“If you zoom in over the month of January when housing values rose and rose at a slightly faster pace, it was definitely houses that outperformed units,” she said.
“Whenever there is a bit of an upswing or more exuberance in housing values, it’s really detached houses that lead the charge. They’re popular, especially with owner occupiers and accrue more value over time because of the attached land. So generally, they are expected to outperform unit values.
“But it’s been a pretty extraordinary month where we’ve seen the premium of the median house value over units rise to a record 45 per cent.
“That’s up from a pre COVID decade average of about 15 per cent. And means that the median house is about $300,000 more than the median unit in capital cities.”
Regional markets are now showing a stronger trend in value growth relative to the capital cities.
The combined regional index rose 1.2 per cent during the quarter compared with a 1.0 per cent rise across the combined capitals.
First time buyers to return, competing against migrants, overseas buyers
Real estate agents expect more first home buyers will return, opting for townhouses or newly renovated homes further away from city centres.
“Eventually there’ll be rate cuts, but they’re buying for the long term; they’re buying for the next 10 years,” says Peter Schenck director Ray White Blackburn in Melbourne.
“I’m expecting the market to perform pretty well. I would imagine our clearance rates … are going to be hovering around about 70 to 80 per cent.”
After some negotiation on price, Natalie (who did not want her surname used) just bought her first home in Australia’s second biggest property market.
She wanted to get in ahead of what she expects will be a mad rush later this year and chose to buy a townhouse in Melbourne’s east for $1.16 million.
“It’s definitely been difficult and stressful trying to figure out whether we will be able to afford the mortgage repayments if interest rates go up, but hopefully now that they’ve started to settle, we should be OK,” she said.
“We tried to start looking at the end of last year, just hoping that perhaps … people were scared off with all the current interest rates and thinking that it would stay around the same for the next six to 12 months. We really wanted to try and get something earlier this year.”
But at another auction in the eastern suburbs of Melbourne, first-time buyers Joseph Kang and Kelly Ke are still getting priced out of the market. They are having to compete against migrants and overseas buyers who want homes in the same area.
“We initially started off looking for like a smaller townhouse, but then even those were kind of getting up there in price,” Mr Kang said.
“So we thought might as well just kind of move further out and get a bit more space.”
Rowan Liew, associate director and auctioneer at Buxton Box Hill in Melbourne, says as the cost of building a new home goes up, more people are opting for newly-renovated homes.
“What we do find is that properties that are maintained well, new-build properties are a little bit higher in demand at the moment,” he said.
“Construction costs (have) been going up for quite some time now. After doing a feasibility report, people find themselves a little bit better off buying something that’s already ready to move into.”
Regardless of when interest rates fall, he thinks migrants and overseas buyers will still be bidding.
“We do work with a few immigration agencies that have buyers who are not really affected by the interest rates,” he said.
“Those buyers are a little bit more cashed up.”
Increasing population will drive property price growth in Cairns above the Brisbane average over the next three years, according to a new report.
According to the organisation’s findings from its flagship Residential Property Prospects report “prices in North and Far North Queensland are starting from a more affordable base, while the downward trend in total listings is limiting the pass through of tight credit conditions”. Quarterly growth returned in both markets in the third quarter of 2023, with the median house price hitting $580,000 in Cairns and $410,000 in Townsville.
Oxford Economics Australia forecasts that the median house price will rise by near six per cent per annum in both regions over the three years to 2026.
This will see price growth outpace Brisbane, closing the price gap to the state’s capital.
The report said elevated home insurance costs in North Queensland had dragged on house price growth over the past decade, but the introduction of the $10bn Northern Australia Cyclone Reinsurance Pool in mid-2022 provides a potential upside for house prices via the reduction of insurance premiums.
Savvy buyers on the Northern Beaches of Cairns are now looking at Clifton Beach real estate over the more expensive neighbouring suburb of Palm Cove. RE/MAX sales agent Natasha Whalley-Thompson has just sold Stuart Kyle and Tony Head’s property on Linden Street, Clifton Beach, to an interstate couple before it went to auction. Picture: Brendan Radke
Maree Kilroy, report author and senior economist at Oxford Economics Australia told the Cairns Post: “Recovering tourist flows and a firming investment outlook will sustain a tight labour market, contributing to higher rates of population growth and maintaining pressure on the housing stock, driving upwards pressure on property prices”.
The report noted that risk exists for the Cairns market as the impact of tropical cyclones plays through.
Ex-tropical cyclone Jasper caused a record level of rain resulting in significant flooding.
This will impact the dwelling stock, likely pushing some residents into the rental market in the short-term, the report said.
Ms Kilroy said: “Short term, Cyclone Jasper will add pressure to the rental market with households needing significant repairs to their dwelling seeking temporary rental properties”. “Longer term the cyclone will likely lead to expensive home insurance bills in North Queensland adds downside risk to prices.”
Ms Kilroy said in the last few years affordability had deteriorated more so in Brisbane (and more broadly South East Queensland) than in Cairns.
“Recovering tourist flows and a firming investment outlook will sustain a tight labour market, contributing to higher rates of population growth” said Maree Kilroy.
She said that since bottoming out in the December quarter of 2022, Brisbane became one of the strongest markets through 2023.
Advertised stock levels are running more than 30 per cent below average, while the volume of home sales is trending almost five per cent above average levels.
“The return of interest rate cuts from late-2024 should facilitate even stronger price growth over the two years to FY2026.” the report said.
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