This article is from the Australian Property Journal archive
HOUSE prices posted their strongest monthly gains since October, hitting new records yet again despite higher interest rates, as demand continues to heavily outweigh supply across the country.
CoreLogic’s national Home Value Index was up 0.6% in February, while PropTrack’s Home Price Index lifted 0.45%.
The CoreLogic Index showed of the capital cities and rest-of-state regions recorded a lift in values over the month, except Hobart, where the market dipped 0.3%.
“Housing values have been more than resilient in the face of high interest rates and cost of living pressures,” said CoreLogic’s research director, Tim Lawless.
“The ongoing rise in housing values reflects a persistent imbalance between supply and demand which varies in magnitude across our cities and regions.”
Perth continued to stand out for price growth, up 1.8% over the month. Adelaide (up 1.1%), Brisbane (0.9%) and the regional areas of South Australia (1.1%), Western Australia and Queensland (both 1.0%) have been showing consistently high capital growth rates. Lawless said these regions are generally benefiting from a combination of comparatively lower housing prices and positive demographic factors that continue to support housing demand.
While growth rates in the major markets of Sydney and Melbourne have levelled out, the monthly trend has accelerated. Melbourne emerged from a three-month slump to record a subtle 0.1% rise; similarly, Sydney dwelling values have moved back into positive territory over the past two months after recording a small decline in November and December.
“Potentially we are seeing some early signs of a boost to housing confidence as inflation eases and expectations for a rate cut, or cuts, later this year firm up,” Lawless said.
| Region | Monthly growth (%) – All dwellings | Annual growth (%) – All dwellings | Median value ($) – All dwellings | Change since peak (%) – All dwellings |
| National | 0.45 | 6.15 | 761,000 | 0 |
| Capital Cities | 0.48 | 7.06 | 823,000 | 0 |
| Regional Areas | 0.36 | 3.9 | 628,000 | 0 |
| Sydney | 0.55 | 7.77 | 1,053,000 | 0 |
| Rest of NSW | 0.24 | 2.92 | 713,000 | -0.55 |
| Melbourne | 0.28 | 1.33 | 797,000 | -3.87 |
| Rest of Vic. | 0.02 | -1.24 | 587,000 | -3.49 |
| Brisbane | 0.54 | 12.16 | 797,000 | 0 |
| Rest of Qld | 0.77 | 8.46 | 645,000 | 0 |
| Adelaide | 0.81 | 12.76 | 709,000 | 0 |
| Rest of SA | 1.09 | 12.15 | 423,000 | 0 |
| Perth | 0.56 | 16.32 | 651,000 | 0 |
| Rest of WA | 0.08 | 9.65 | 484,000 | 0 |
| Hobart | -0.12 | -2.26 | 664,000 | -7.99 |
| Rest of Tas. | 0.01 | 0.51 | 506,000 | -0.85 |
| Darwin | 0.08 | -0.8 | 481,000 | -2.38 |
| Rest of NT | -0.08 | -3.83 | 437,000 | -4.37 |
| ACT | 0.49 | 1.16 | 828,000 | -5.42 |
The re-acceleration in value growth has been accompanied by a bounce back in auction clearance rates, which averaged in the high 60% range through February, and which Lawless said “points to a better fit between buyer and seller price expectations”.
Consumer sentiment also recorded a solid rise in February, signalling a lift in confidence.
Lawless said that despite the shortfall of supply relative to demand continuing to place upwards pressure on values, “it’s hard to see a significant rebound in values shaping up given downside factors”.
“Affordability constraints, rising unemployment, a slowdown in the rate of household savings and a cautious lending environment, are all factors likely to keep a lid on value growth over the near term.”
S&P Global Ratings believes the resilience of home loan borrowers in cutting costs to service debts will be tested in 2024 as savings ratios have fallen from 24% during the peak of COVID to just 1%.
PropTrack senior economist said the expectation that interest rates will fall in the second half of 2024 is likely providing a positive tailwind for activity.
“Housing demand is also being buoyed by population growth, tight rental markets, resilient labour market conditions and recent home equity gains. Meanwhile, the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing.
“Looking ahead, the positive tailwinds for housing demand and a slowdown in the completion of new homes are likely to offset the impact of reduced affordability and a slowing economy. As a result, prices are expected to lift further in the months ahead.”
The federal and state and territory governments’ National Housing Accord will officially kick off from July, aimiing to deliver 1.2 million “well-located homes” across Australia, although analysts have suggested the target is farfetched given current completion and approval rates and labour shortages. The federal government has also introduced the $10 billion Housing Australia Future Fund (HAFF) – which critics say doesn’t go far enough – and the accompanying $2 billion Social Housing Accelerator to further boost supply. The HAFF is also a five-year program beginning in July.
Fall in interest rates could be nearing
Capital Economics Australia and New Zealand economist Abhijit Surya said following yesterday’s release of weak retail data figures in January that “we’re growing more confident in our view that the Bank will start cutting rates by Q3 itself, rather than in Q4 as most analysts are predicting”.
“The softness in retail spending should give the RBA greater confidence that restrictive monetary policy is subduing aggregate demand as intended.”
The Reserve Bank of Australia considered raising interest rates again at the February meeting, minutes showed, as the board remains unconvinced that inflation had come down to an acceptable level – and that further rates could still be in play. However, ABS data this week showed inflation at 3.4% in the year to January – lower than widely expected – while the unemployment rate lifted to 4.1%.
