- Australia's house prices surge 4.9%, outpacing global averages.
- Global rankings highlight Australian housing market's resilience, contrasting global economic challenges.
- Price increase fueled by restricted supply, strong employment, and robust wage growth.
Australia has ranked 18 out of 56 among the world in terms of house price growth over the 12 months to the end of September 2023, according to Knight Frank’s latest research.
Australia’s house price growth higher than global average
Information from the Global House Price Index Q3 2023, which reviews mainstream housing market trends across 56 countries quarterly, indicated that home prices held strong despite higher debt costs. In fact, the average annual price growth internationally rose to 3.5% in the year to the end of Q3, up from 2.2% in the last quarter.
The Knight Frank Global House Price Index
Australia’s house price growth over the past 12 months surpassed the global average at 4.9%, with a 1.9% increase over Q3.
Coming in first in the rankings, a title it’s held since Q1 2020, was Turkey, which saw an extraordinary annual growth of 89.2% and quarterly growth of 18.1%.
Trailing behind was Croatia in second, with 13.7% annual growth, and Greece in third, with 11.9% annual growth.
At the bottom of the rankings was Sweden, which witnessed house prices falling by 11.1% over the 12 months to the end of September.
Restricted supply, robust employment and wage growth keeping prices up
Knight Frank head of residential research Michelle Ciesielski commented that Australia was among the 35 markets undergoing annual price growth, while the rest saw price falls.
“The rate of annual price growth reached a peak of 10.9% in Q1 2022 but sharply slowed to 2.2% in Q2 of this year,” she said.
“The upturn in the latest quarter indicates strengthening price growth in several markets, including Australia, Ireland, Sweden, the UK and the US, despite rising interest rates and therefore higher costs for mortgage borrowers. News Release
“Remarkably, despite the fastest rise in interest rates in history, globally residential prices only dipped slightly at the beginning of this year, and have since resumed growth.”
Michelle Ciesielski, Knight Frank
“They now stand 3.5% above their 2022 peak. Even when adjusted for inflation, real house prices are only 2% below their 2022 peak despite higher rates.”
Homes for sale remain scarce
Knight Frank head of residential Erin Van Tuil explained that the home shortage trend continues to dominate, with sales volumes dipping by 15% to 25% from recent highs across developed economies.
“The absence of a pricing correction indicates that this constraint on activity is expected to persist, likely through 2024 and potentially well into 2025. Activity is anticipated to rebound when rates are substantially lowered,” she said.
“In Australia, on one hand, this is the ideal opportunity for first home buyers to enter the market, but overall numbers are down. Many have seen their deposit absorbed by rental growth, the overall cost of living and/or they’ve been unable to prove serviceability of the loan required to be borrowed.”
However, Van Tuil noted that there was a noteworthy amount of cash buyers, like downsizers, who were looking to enter the market and make their low-upkeep lifestyle a reality.
“This pent-up demand, plus those currently less active in the market, including families seeking to upsize, and those much-required investors to keep weekly rents at bay as our population grows, will place further pressure on capital values across the country in the coming years.”