️ Highlights:
1. Home values in Australia’s major capital cities have continued to rise for the seventh consecutive month, with a 0.9% increase in September on a 5-city aggregate basis.
2. Adelaide, Brisbane, and Perth saw the highest growth in home values in September, with increases of 1.4%, 1.3%, and 1.3% respectively.
3. While home values have risen by 2.8% in the September quarter at the 5-city aggregate level, the pace of growth has slowed down.
4. Sydney, Melbourne, and Brisbane still have values below their peak in April 2022, while Perth and Adelaide have surpassed last year’s peak.
5. Despite tightening monetary policies and restricted borrowing capacity, the housing market has been driven by factors such as record net overseas migration, surging rents, and limited available stock.
Australian home values are expected to continue appreciating alongside rents, especially with the anticipation of further rate cuts by the Reserve Bank of Australia.
Executive Summary
CoreLogic’s Daily Dwelling Values Index, a comprehensive metric that monitors value fluctuations across Australia’s five major capital cities, reported a 0.9% increase in September on a 5-city aggregate basis. This marks the seventh consecutive month of growth in home values. The data reveals a complex landscape of growth rates and potential challenges, particularly in the context of the Reserve Bank of Australia’s (RBA) unprecedented monetary tightening and other economic factors.
Detailed Analysis
- Monthly Growth: All five major capital cities exhibited growth in September, spearheaded by Adelaide at 1.4%, followed closely by Brisbane and Perth, both at 1.3%.
- Quarterly Trends: Over the September quarter, home values escalated by 2.8% at the 5-city aggregate level. Brisbane led this surge with a 4.1% increase.
- Pace of Growth: Despite the upward trend, the rate of growth has shown signs of deceleration at the 5-city aggregate level.
- Year-over-Year Comparison: Home values are currently 3.2% below their peak in April 2022 at the 5-city aggregate level. However, this decline is not uniform across all cities. Sydney, Melbourne, and Brisbane are still below last year’s peak, while Perth and Adelaide have surpassed it.
- Pandemic Impact: Since the onset of the pandemic in March 2020, values have surged by 17.8% at the 5-city aggregate level. This growth is predominantly driven by Adelaide (49.8%), Brisbane (38.9%), and Perth (28.0%).
Economic Factors and Future Outlook
The robust growth in house prices is particularly noteworthy given the RBA’s historic monetary tightening, restricted borrowing capacity, and lower-than-usual sales volumes. The Albanese Government’s record net overseas migration, rising rents, and scarcity of available stock continue to counterbalance these economic pressures. With net overseas migration expected to remain at record levels and the RBA likely to cut rates next year, the upward trajectory in home values and rents is anticipated to persist.
Conclusion
An impending housing affordability crisis is on the horizon for Australia, fueled by a complex interplay of economic factors and market dynamics.