CoreLogic has reported a significant boost in dwelling values countrywide in FY2023–24 despite an array of downside risks including high rates, cost-of-living pressures, affordability challenges, and tight credit policy.
But despite the strong yearly growth rate, CoreLogic reported that the growth rate has eased since the highs of mid-2023, when the quarterly rate of change peaked at 3.3 per cent before slowing to 1.8 per cent in June.
“The housing market resilience comes back to tight supply levels which are keeping upwards pressure on values,” said CoreLogic’s research director Tim Lawless.
Commenting on CoreLogic’s latest data, AMP chief economist Shane Oliver said he expects national average home prices to continue to rise in the 2024–25 financial year.
Reflecting on growth over the past year, Oliver explained that the “chronic housing shortage” got the upper hand over high interest rates as immigration levels surged. Looking ahead, however, he predicted a more modest 5 per cent growth given the expectation that high interest rates will act to restrict demand, and rising unemployment will boost distressed listings.
“The big negative influence on the property market remains poor and still worsening affordability and high mortgage stress on the back of high prices, high debt levels, and high mortgage rates,” Oliver said.
“Thanks to the surge in interest rates and average home prices, there is now a wide divergence between buyers’ capacity to pay for a property and current home prices … in the absence of rapid interest rate cuts this continues to point to a high risk of lower property prices at some point if saving buffers run out and access to ‘the bank of mum and dad’ slows.”
Oliver explained that this is reinforced by “ultra-low” sentiment towards property.
Moreover, he noted, a sharp rise in unemployment due to weak spending in the economy would add to the downside risks affecting property prices from prolonged higher interest rates, as would a potential collapse in net immigration resulting from government cuts in student visas.
However, he acknowledged that, for now, the supply shortfall continues to dominate.
“The supply shortfall points to upside risk, but the delay in rate cuts and talk of rate hikes risks renewed falls in property prices as it is likely to cause buyers to hold back and distressed listings to rise,” Oliver said.
He noted that approvals for new dwellings are currently running around 160,000 a year, well below the government’s objective of 240,000.
“Over the last year, the shortfall of homes expanded by another 80,000 or so dwellings and the accumulated shortfall is now estimated to be around 200,000 dwellings,” Oliver said.
He, however, noted that signs of softening are becoming evident, namely auction clearance rates are cooling, new listings are rising across most cities, with some sharply higher, possibly due to increasing distressed listings from higher mortgage rates. At the same time, top quartile property price gains, once leading the upswing, are now the weakest as affordability and borrowing constraints steer buyers towards lower-priced properties.
“The key to watch will be interest rates, unemployment, and population growth. Even higher-for-longer rates, a sharply rising trend in unemployment and a sharp slowing in net migration would be negative for property prices,” Oliver concluded.
According to CoreLogic data, Perth was Australia’s top growing city with an annual house price growth rate of 23.6 per cent, followed by Brisbane with 15.8 per cent, Adelaide with 15.4, and Sydney with 6.3 per cent. Hobart was the only city to see a dwelling price decrease of a slim 0.1 per cent.
