Property price growth is starting to slow
Property price growth is starting to slow – Image: Unspalsh.
  • Home prices grew 1.1% in June
  • The rate of growth is now starting to slow down
  • Rental growth is starting to ease, meaning in good news for tenants

Property prices across the country have ticked higher in June, however, the pace of growth is now starting to slow down.

According to CoreLogic’s latest Home Value Index (HVI), national property prices increased 1.1% in June, down slightly from the 1.2% gain recorded in May.

The increase in prices was again led by Sydney which recorded a 1.7% rise in June, taking the cumulative recovery since the January trough to 6.7%.

Brisbane also performed strongly, with values up 1.3%, while Perth and Adelaide’s prices jumped 0.9%.

Hobart was the only capital city market where prices declined, falling 0.3%. While Darwin (0.5%) and Canberra (0.4%) both saw prices drift higher.

CoreLogic, Research Director, Tim Lawless said a lack of available supply continues to be the main factor keeping upwards pressure on housing values

“Through June, the flow of new capital city listings was nearly 10% below the previous five-year average and total inventory levels are more than a quarter below average,” said Lawless.

“Simultaneously, our June quarter estimate of capital city sales has increased to be 2.1% above the previous five-year average.”

Lawless said the imbalance between supply and demand has seen selling conditions moving back in favour of vendors over buyers.

“Auction clearance rates across the combined capitals held in the high 60% range through June, in stark contrast to late last year when clearance rates were generally below 60%,” he said.

“Outside of auction markets, vendors have become less flexible on their price expectations, with capital city discounting rates tightening from -4.3% late last year to -3.6% in June.

According to Lawless, while prices have been moving higher across the country, the rate of growth is now starting to slow as the impact of further rate hikes from the Reserve Bank of Australia (RBA) now start to weigh on demand.

“A slowdown in the pace of capital gains could be a reflection of a change in sentiment as interest rate expectations revise higher.”

“Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply.”

Change in dwelling values

Index results as at 30 June, 2023 Month Quarter Annual Total return Median value
Sydney 1.7% 4.9% -5.1% -2.2% $1,073,924
Melbourne 0.7% 1.8% -5.7% -2.6% $762,537
Brisbane 1.3% 3.0% -8.2% -4.1% $725,397
Adelaide 0.9% 2.1% 0.0% 3.6% $663,136
Perth 0.9% 2.8% 2.5% 7.3% $588,454
Hobart -0.3% 0.1% -12.7% -9.0% $651,187
Darwin 0.5% -0.3% -1.0% 4.7% $492,081
Canberra 0.4% 0.8% -8.8% -5.2% $830,217
Combined capitals 1.2% 3.3% -4.8% -1.4% $789,649
Combined regional 0.5% 1.1% -6.5% -2.4% $586,645
National 1.1% 2.8% -5.3% -1.6% $723,006

Source: CoreLogic.

Regional prices still rising

Lawless said regional home prices rose 1.2%.

“After regional population growth boomed through the worst of the pandemic, internal migration trends have normalised over the past year, resulting in less housing demand across regional markets,” he said.

“Additionally, housing demand from overseas migration is skewed towards the capital cities rather than the regions.”

According to Lawless, falling levels of supply have been a key component of the rebound in house prices.

He said homes advertised for sale in the capital cities were almost 20% lower than at the same time last year and 26.4% below the average for this time of the year.

Regional listings were also lower in June down 32.9% from the previous five-year average.

Rent growth slows

After a tough 12 months for renters, there is some hope in sight with signs that the market is now starting to cool down.

Lawless said, rents increased 0.7% in June, which was the smallest increase since January 2023 and signals that rent growth is now declining.

“Despite such tight vacancy rates, it’s likely the trend in rental appreciation will continue to moderate, simply due to rental affordability pressures forcing a change in rental household formation.”

“The early signs of a rebound in the average household size can already be seen in data published by the RBA.”

Prices growth could slow

Looking ahead and Lawless said if the RBA continues to hike interest rates it will keep pressure on home prices and likely slow down growth.

“Forecasts on where the cash rate will land and how long it will stay elevated vary, but it’s likely there is at least one more rate hike to come, potentially more.

“It’s hard to imagine the recent pace of growth in housing values being sustained while sentiment is close to recessionary lows and the full complement of borrowers are yet to experience the rate hiking cycle in full.”

Tim Lawless, CoreLogic, Research Director

According to Lawless, when recent fixed-rate borrowers are forced to roll off to variable rates, it’s going to put a lot of households under extreme pressure.

While the tighter borrowing conditions and serviceability assessments will also make it far harder for new borrowers to access finance, which will also weigh on property prices.

He said low inventory levels have been one of the biggest reasons prices have rebounded over the past few months.

“A change in the supply dynamic could become evident in spring when the flow of listings would typically ramp up.

“We could also see more listing flow onto the market if mortgage stress becomes widespread.”

However, Lawless said there are still no signs that stock levels are rising, despite some locations like Hobart seeing an uptick in sellers listing their homes.

“This will be a key trend to watch moving forward.”

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