Australia's housing market is on the decline, with home prices falling for the first time in nearly two years, according to recent data from CoreLogic Inc. The national home price index recorded a decrease of 0.2%, marking the first dip since February 2023. This recent trend raises questions sobre the health of Australia's real estate market as buyers face increasing affordability challenges.
The decline was chiefly driven by significant drops in the country's largest cities. Sydney, often regarded as the most expensive city, saw its median house price decrease by 0.6%, settling at approximately $1.1 million. Melbourne followed closely with prices down by 0.7%. Canberra and Hobart also recorded slight declines of 0.5%, contributing to the downward momentum.
Interestingly, the situation has not been entirely grim for all regions. While capital cities struggled, Perth has emerged as Australia’s star performer for 2024. Housing prices there have risen by 17.59% year-on-year, with December alone recording a 0.39% increase. This trend has pushed the median price to around $845,000, showcasing Perth's resilience amid broader market challenges.
Anne Flaherty, senior economist at REA Group, attributes the national decline to elevated housing stock levels, which have allowed buyers to be more selective. “A relatively high number of houses for sale across the Australian market gave buyers more choice and time, driving the small December dip,” explained Flaherty. This influx of available properties has led to decreased urgency among buyers, impacting overall price performance.
Despite the December decline, national home values remain 45.1% higher compared to March 2020, showing the resilience of Australia's property market. Houses and units reported similar monthly decreases of 0.17%, bringing their national medians to $868,000 and $653,000, respectively. Success stories persist, particularly within Western Australia, where both houses and units recorded impressive annual gains of 18.8% and 17.5%.
The factors contributing to these shifts include high interest rates and economic uncertainty, as evidenced by the Reserve Bank of Australia's decision to maintain interest rates at 4.35% throughout the latter half of 2024. “While the impact of stage three tax cuts bolstered borrowing capacities for some buyers, softer economic conditions have counteracted this effect,” noted Flaherty.
Regional markets have displayed strength, with regional South Australia standing out for experiencing annual growth of 13.03%. Interestingly, regional Queensland has also become home to some of the fastest-growing markets. Townsville emerged as the nation's top-performing area, recording annual growth of 26.3%, prompting experts to examine how these regional hubs are attracting buyers seeking more affordable living options away from urban centers.
The situation paints a complex picture of the Australian housing market as it steps uncertainly forward. Major cities like Melbourne appear to be facing more pressing challenges, including oversupply and declining investor interest, partly driven by increased taxes and reduced demand. With anticipated market adjustments continuing through 2025, analysts expect cities like Melbourne and Darwin to face sustained pressures, potentially leading to even lower home prices.
Tim Lawless, research director at CoreLogic, emphasized, “The housing market is catching up with the reality of market dynamics,” reflecting the shift from previously soaring growth to current stagnation. Lawless indicated which markets might emerge as newfound favorites, singling out Adelaide, which recently recorded a quarterly growth of 2.1% compared to Perth’s slightly lower increase of 1.9%.
Buying behavior is likely to remain focused on more affordable options, as buyers continuously turn their attention to regions with lower property prices, supported by the findings from the Regional Movers Index. The trend indicates Australian consumers are gravitating toward regions such as Newcastle and the Sunshine Coast, emphasizing the search for affordable housing as financial pressures mount.
Moving forward, the outlook remains mixed as buyers navigate the realities of the current housing market. While Perth and some regional areas continue to thrive, overall demand is weaker, driven by buyers' rush toward more affordable markets. The anticipated divergence between high-performing regions and cities facing economic and demand challenges points to the growing disparity within the Australian property market as it heads toward 2025.