Australia’s housing prices carried their upward trend into 2024

The start of 2024 continued the upward trend for the year for dwelling values, recording a 0.4% increase in January, marking its 12^th straight month of value increases.

Clearance rates and the volume of homes sold has held slightly above average over the past 3 months, despite worsening housing affordability due to high interest rates, ongoing cost of living pressures and low consumer sentiment. CoreLogic’s research director, Tim Lawless believes “housing demand has been buoyed by high migration, but also tight rental markets that have probably incentivised renters to transition towards home ownership if they can afford to do so.”

While the housing market has started on a similar footing to 2023, there is greater variation between regions and dwelling types than last year.

Stronger regional markets

The national increase across the quarter to February was 1.0% with the regional gains (1.2%) outperforming those of the combined capital cities (1.0%). Regional Western Australia lead the growth for the nation over the quarter with a 3.9% increase, following by regional Queensland (1.8%) and regional South Australia (1.5%).

CoreLogic’s research director, Tim Lawless, stated “While both the combined capitals and combined regional markets are losing momentum in the pace of value growth, the capital city trend has slowed more sharply, mostly due to the flattening of growth conditions in Melbourne and Sydney.”

Australians willing to pay a premium for detached homes

While dwelling prices have continued to rise broadly across the country, house values have continued to increase at a faster rate than unit values. Detached homes increased by 1.2% over the three months to February while units increased by 0.4%.

The gap between the median capital city house and unit values reached a record high of 45.2% in January. Tim Lawless highlighted that “since the commencement of the upswing, capital city house values have surged 11.0% higher while unit values are up 6.9%.” Showing “that most Australians are willing to pay a higher premium than ever for a detached home.”

The outlook for 2024

While 2023 defied expectations, the property market proving surprisingly resilient. PropTrack Senior Economist Angus Moore, believes that while home prices will face headwinds this year, he expects prices to still grow, albeit slowly.ⁱ

“The rapid pace of interest rate increases has pushed housing affordability to its worst level in at least three decades, which will be a constraint for many buyers, and is a headwind for home prices.”

However, with markets not expecting further interest rate increases and a possible decline for rates later in the year in addition to strong population and wage growth, and low levels of unemployment, all work contribute to the driving fundamental demand for housing.

Dwelling values over the quarter 

Over the quarter all capitals with the exception of Melbourne and Hobart recorded an increase, with Sydney prices leading the way. Regional markets experienced slightly higher growth than the combined capital cities with an increase of 1.2% over the quarter.

Sydney 

Sydney’s monthly pace of growth continues to slow, with the harbour city’s property prices increasing by just 0.1%. Rental yields in Sydney holding steady at 3.0%. 

Brisbane 

Prices in Brisbane have increased by 3.2% over the quarter, slowing slightly on last quarters increase of 3.8%. The sunshine state’s capital has a has a current gross rental return of 3.9%.

Melbourne 

The Victorian capital continued to lose ground over the last quarter, with dwelling values decreasing by 0.9% The rental yield increased subtly with a 3.5% return. 

Canberra  

The growth rate of housing values in Canberra showed a slight increase over the quarter, with a 0.2% rise in values. Investors can take note of a gross rental return of 3.9% in the nation’s capital.

Perth 

Perth recorded the greatest increase across the capital of 4.9% over the quarter, continuing its strong growth. Investors will be happy with the country’s second highest gross rental return (behind Darwin) at 4.6%. 

Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (February 2024)

i https://www.realestate.com.au/insights/proptrack-home-price-index-january-2024/