Property markets look to have stabilised after months of falls – and prices are up in some cities

After several months of declining prices, shock new data shows property markets appear to have stabilised – and values are even on the up again in some cities.

The latest PropTrack Home Price Index, released today, shows that widespread declines seen across most capital cities in September eased last month.

Results for October indicate the traditionally busy spring selling season has taken hold after a lacklustre start. Nationally, home prices were down just 0.06% in the month, PropTrack senior economist Eleanor Creagh said.

“Rising interest rates in the past several months have quickly rebalanced the housing market from last year’s extreme growth,” Ms Creagh said.

“However, the pace of price falls has slowed from the faster declines seen earlier this year when rates first started rising.”

The PropTrack Home Price Index results indicate sellers are adapting to market conditions and active buyers are taking advantage of the less competitive conditions on offer, she said.

Home prices in Melbourne bucked the recent declining trend to post a 0.02% increase. Prices in Darwin saw the strongest growth of all the capital cities in October, up 0.21%, while the resilient Adelaide market rose 0.12% to a fresh peak.

“Perth was the other capital city market to record a meaningful positive growth result in the month, up 0.11%,” Ms Creagh said.

The largest falls in the month were seen in Hobart, down 0.46%, Canberra, down 0.37%, and Sydney, down 0.21%.

Regional markets continue to hold up much better than their big city counterparts, rising 0.06% in October.

Big cities softest overall

After a modest fall last month, home prices in Sydney have dropped 5.82% in the past 12 months – the greatest fall of any market.

“But the pace of price falls has also eased in Sydney,” Ms Creagh said.

Higher interest rates have had the biggest impact in regions with steeper property prices, she said, and the Harbour City is no exception.

In Melbourne, home prices are down 3.45% in the past 12 months, but the Victorian capital posted a surprising increase in October.

Is that 0.02% lift a sign of things to come?

“Price falls are expected to continue in Melbourne in the period ahead as interest rates continue to rise, further reducing borrowing capacities,” Ms Creagh said.

In Brisbane, sustained strong levels of migration to Queensland from interstate and overseas is likely to buffer the housing market moving forward, she said.

“There was a slight fall in prices in Brisbane last month, down 0.09%, putting them now 2.77% below their peak from April.

“But they’re still 7.51% higher than they were in October 2021. That said, the city was seeing annual growth rates above 30% in early 2022.”

Smaller capitals post the biggest monthly falls

Hobart led the price declines in October, falling 0.46% to now sit 2.68% below their peak in April.

“But it must be said that prices in the Tasmanian capital are a staggering 44.4% higher than their pre-Covid pandemic levels in March 2020,” Ms Creagh pointed out.

“And they remain 2.95% higher than this time last year.”

The second-largest fall of the capital cities in October was in Canberra, where prices slipped 0.37%. They are now 3.92% below their March peak.

Where prices are still rising

Adelaide has been the country’s strongest performing property market over the past year, and prices there nudged upwards by 0.12% in October.

That represents a new peak for the South Australian capital, which continues to lure buyers in search of affordability and larger homes.

“Those trends are likely to continue to buoy the Adelaide market,” Ms Creagh said.

Home prices in Perth were up 0.11% last month, with the Western Australian capital city holding up better than many major markets on the east coast, she said.

“Prices have increased by 5.67% over the past year and are just shy of their peak level.”

And in the Top End, prices increased by 0.21% in Darwin last month.

What lies ahead

Spring is typically the busiest period of the year in real estate, with confident sellers bringing their homes to market and buyers buoyed by warmer weather.

But the aggressive approach to interest rates taken by the Reserve Bank, in a bid to quash soaring inflation, has dented activity over the course of 2021.

“The RBA appears to be done with the super-sized rate hikes of 50 basis points we’ve seen in recent months,” Ms Creagh said.

“There are expectations that they’ll take a slower path when hiking rates. This might give those who are considering buying a home a bit of a confidence boost.”

There are further rate rises on the horizon, though – with an increase when the RBA board meets on Tuesday an almost-certainty, she said.

“Borrowing costs will increase as a result and borrowing capacities will reduce, which will weigh on property prices.

“But I think this will be offset by very tight rental markets, which might prompt some who rent to buy a home instead, as well as strongly rebounding rates of migration.

“Housing supply pressures are also persisting, and unemployment is very low, which will both also stem larger price falls to some extent.”