Housing market softer

Rate hikes, economic conditions take some heat out

The impact of five interest rate hikes by the Reserve Bank in 2023 – adding to its eight increases in 2022 – cost of living pressures, affordability challenges, rising advertised stock levels and low consumer sentiment are keeping the heat out of the Australian housing market.

CoreLogic’s latest data, released on Tuesday, shows the national home value index (HVI) rose 8.1 per cent in 2023, a significant turnaround from the 4.9 per cent drop seen in 2022, but well below the 24.5 per cent surge of 2021.

December’s national 0.4 per cent increase in prices saw 2023 finish with a relatively soft monthly rise in home values.

“This was the smallest gain in our national monthly HVI since values started rising in February,” CoreLogic’s research director Tim Lawless said.

After monthly growth in home values peaked in May at 1.3 per cent, rate hikes and economic conditions progressively took some heat out of the market through the second half of last year, he said.

The year was “punctuated by diversity”, with the annual change in housing values ranging from a 15.2 per cent surge in Perth to a 1.6 per cent fall across regional Victoria.

Among capital cities, Melbourne values declined 0.3 per cent in December, while Sydney home values stabilised with a monthly growth rate of just 0.2 per cent.

But on an annual basis, Sydney house values jumped 11 per cent, Brisbane recorded a 13 per cent gain, while Melbourne was up 3.5 per cent.

Smaller capital cities were soft through most of the year, with Hobart down 0.8 per cent and Darwin off 0.1 per cent for 2023, while the ACT recorded a rise of just 0.5 per cent. Adelaide was a strong gainer, up 8.8 per cent.

CoreLogic highlighted dwelling values have been rising at more than 1 per cent each month on average across Perth, Adelaide and Brisbane since May last year, while in Melbourne and Sydney the pace of growth has slowed sharply since the June rate hike.

The report found that regional home prices rose 0.2 per cent in December, counteracting the 0.1 per cent decline in the combined capital cities.

Melbourne has been the weakest performing property market in the nearly four years post-Covid, with prices sitting just 15.5 per cent higher compared to March 2020, the report said.

Meanwhile, Perth was the strongest performing property market in 2023, recording the highest growth of any capital city or regional area.

Overall, prices nationally rose by 5.5 per cent in 2023, according to PropTrack.

But despite the cool down in capital city prices seen over December, prices in 2024 will be supported by population growth and what looks likely to be a more stable interest rate environment, she said.