- In December, prices fell in Sydney (-0.08%) and Melbourne (-0.55%).
- December was Sydney's first price decline in 13 months.
- Melbourne recorded a meagre annual growth compared to other capital cities, at 0.89%.
National home prices remained relatively stable in December, however, this was largely driven by growth in regional areas, according to PropTrack‘s Home Price Index December 2023 report.
Combined capital city prices dropped 0.09% in December, the first time home prices saw a fall in 2023.
“Several factors contributed to the slowdown in home prices over the last quarter of 2023,” said PropTrack report author, Anne Flaherty.
“There was an additional interest rate rise as well as an increase in the supply of homes listed for sale, which provided buyers more choice and helped alleviate competition.”
Anne Flaherty, PropTrack
Flaherty said even though recent months have seen a rise in the number of properties for sale, overall supply remains relatively constrained, particularly in Perth and Brisbane.
“This has been a key contributor to price rises in these markets,” she said.
“Despite the cool down in capital 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.”
Annual change in home prices – by capital city, all dwellings
The report found national home prices overall rose by 5.52% in 2023.
Sydney house prices rocketed over 7% in 2023
According to PropTrack’s report, Sydney’s prices remain close to peak levels, seeing an annual price growth of 7.72%.
A confluence of circumstances exerted upward pressure on Sydney’s house prices, including rapid population growth, renters growing fed up with tight vacancy rates and increasing rental prices and opting to buy, and a lack of supply on the market.
Sydney asking rents
Sydney rental vacancy rate
Stock on market for rent in Sydney
However, Flaherty noted Sydney’s home price fall of 0.08%, which, although minor, was Sydney’s first home price drop in 13 months.
Sydney home price growth
Moreover, this fall was recorded just a month after a record high reached in November; PropTrack senior economist, Eleanor Creagh, noted in her report that Sydney saw a 0.32% increase.
Although it remains to be seen whether further rate rises will lead to a cooling effect, REINSW CEO, Tim McKibbin, previously told the Property Tribune that the effect of a hypothetical rate rise would unlikely make a significant impact on the market.
Melbourne house prices underwhelming
Throughout 2023, Melbourne’s property price growth figures have been relatively sluggish – PropTrack recorded an annual growth of 0.89%; a meagre annual increase compared to other capital cities such as Brisbane (10.45%), Adelaide (10.89%), Perth (14.75%).
Successive cash rate hikes were noted as contributors to Melbourne’s downward price spiral.
Melbourne home price growth
Flaherty said Melbourne saw its median home price fall by 0.55% in December, the second sharpest monthly fall behind Canberra.
Moreover, she added that Melbourne’s price growth levels remain 4.6% below the peak levels achieved in March 2022.
Melbourne property prices
“Melbourne has been the weakest performing property market in the nearly four years post-COVID, with prices sitting just 15.5% higher compared to March 2020,” she said.
Flaherty told The Property Tribune that multiple factors account for Melbourne’s lacklustre performance.
“First, Greater Melbourne saw its population shrink more than any other city during the pandemic years, decreasing demand for real estate,” she said.
“Higher taxes are likely also having an impact; all up, Victorians pay the highest property taxes of any state and, from 1 January 2024, those who own more than one property will face an additional tax.”
Anne Flaherty, PropTrack
“Higher taxes act as a disincentive to investing in Victoria relative to other states, which is likely to be hampering buyer demand, particularly from investors.
“Despite these factors, Melbourne is forecast to be the fastest growing capital city over the coming decade which should support demand for housing, and, ultimately, prices, particularly with development activity slowing.”
