According to the latest PropTrack house price index, Australia's median house price hit a record high in June, but the pace of growth was the slowest in 18 months.
According to RealEstate, house prices across Australia rose 0.18 per cent in June and 6.55 per cent over the past year. While home prices have never been more expensive, the slowdown in growth could be good news for some buyers.
At the same time, house prices have continued to rise in many parts of the country over the past year, despite a 30% drop in borrowing capacity due to 13 central bank rate hikes since May 2022. Strong demand for homes has kept prices high, especially in areas where there is a shortage of housing. However, price growth is starting to slow down as listings increase in some cities.
According to PropTrack senior economist Eleanor Creagh, growth is starting to slow in every capital city.
"Since the end of the summer season, growth has been steadily slowing as buyers have more choices," she said. ”
With the third phase of tax cuts coming into effect and buyers' borrowing capacity increasing, Australians are expected to have more funds to spend on home purchases from today. While these changes will give buyers more money, they are also a double-edged sword.
(Image source: RealEstate)
Creagh believes this has the potential to lead to higher house prices. Still, the increase in borrowing capacity is expected to be most helpful for first-time homebuyers.
"While home prices are expected to continue to grow in the coming months, they are likely to maintain a slower pace over the winter, especially with the uncertainty of rate hikes," Creagh said. ”
Economists at Australia's major lenders still see a cut in interest rates next, but a higher-than-expected inflation outcome also increases the likelihood of a rate hike by the Reserve Bank in August.
Last month, the Reserve Bank of Australia (RBA) left interest rates unchanged and the board discussed a rate hike but did not consider a rate cut at all.
Over the past year, the median house price in Australia has risen by 6.55%, with house prices (6.74%) growing slightly faster than units (6.6%). But in some cities, the rate of growth is much faster.
(Image source: RealEstate)
Perth's median house price has risen by a staggering 23% over the past year to an all-time high of $762,000, making it the fastest growing of any capital city. Meanwhile, the median Adelaide house price has crossed the $800,000 mark, rising about 15% over the past year to a new high of $810,000.
Brisbane's market is also moving fast, with house prices up almost 14 per cent and unit prices up almost 17 per cent. Brisbane is currently the second most expensive city in Australia, after Sydney.
At the same time, Creagh said conditions for buying homes in Australia's two largest capital cities have improved.
"In Sydney and Melbourne, the surge in sales activity has led to an increase in new listings on the market this year, giving buyers more choice." While Sydney house prices rose 0.41% in June to a new high, this is the slowest pace of growth this year. The average house price in Sydney is now $1.428 million, while the median price of a unit is $818,000.
Bresic Whitney chief executive officer Thomas McGlynn said the tax cuts were unlikely to drive broad-based price growth, but could push up the price of affordable properties.
In Melbourne, house prices fell by 0.43% in June, bringing them back to levels almost a year ago.
Creagh noted it was the third consecutive month of decline. "Melbourne has weaker price momentum as buyers have always had more choice relative to other markets, which has led to weaker selling conditions." "At the same time, Victoria's construction rate is relatively balanced relative to population growth and is more stable than in other regions."
Since mid-2023, Melbourne's total number of listings has been consistently above the decade average.
Prices in Hobart, Darwin and Canberra fell slightly in June. Looking ahead, house prices are expected to continue to rise, albeit at a slower pace than over the past year.
PropTrack's latest Property Market Outlook report forecasts a 2% to 5% increase in home prices across the country in FY 2024-25.
Prices in Perth will rise by 8 to 11 per cent at the fastest, followed by Adelaide with an expected 5 to 8 per cent increase.
Prices in Sydney, Melbourne and Brisbane are expected to rise by 3% to 6%. Price growth is expected to be slightly slower in Canberra (2-5%), Hobart (0-3%) and Darwin (1-4%).