Australian Property Market: Values Rise By Modest 0.3%

Australia’s mid-sized capitals are the clear stand-outs of our housing market, as small rises in Perth, Adelaide and Brisbane off-set monthly falls in other cities, including Sydney.

CoreLogic’sHome Value Index (HVI) recorded an overall modest gain of .3% for the month of October—nevertheless, it was the 21st month of consecutive growth since the market began its recovery in February last year. Perth rose by 1.4% over the month, followed by Adelaide (1.1%), Hobart (.8%) and Brisbane (.7%). Declines were recorded in Darwin (-1%), Canberra (-0.3%), Melbourne (-0.2%) and Sydney (-0.1%).Over the past year, Perth has risen 22.6%, Adelaide is up 15% and Brisbane is 13% higher.

CoreLogic’s research director, Tim Lawless, said buyers were most active in more affordable markets.

“A combination of less borrowing capacity and broader affordability challenges, as well as a higher-than-average share of investors and first-home buyers in the market is the most likely explanation for stronger conditions across the lower value cohorts of the market,” he said.

“The past three months has seen the lowest quartile either record a higher growth rate or smaller decline relative to the upper quartile or broad middle of the market across every capital city except Canberra.”

In news that will surprise few who have tried to buy a home in Australia, the total value of our residential property market has hit a new high of $11 trillion.

According to CoreLogic, the watershed figure was reached after the total value increased by $900 billion over the past 12 months. It is believed that investors represent a significant proportion of the strong buyer demand, making up 38.6% of new home loans, which is the highest proportion in seven years.

CoreLogic Australia economist, Kaytlin Ezzy, said investors were drawn to property because of the potential for capital gains, as well as long-term rental income growth.

“The increase in available stock is also providing more opportunities for investors to enter the market, which wasn’t the case during last year’s constrained conditions,” she said.

“However, this trend could intensify competition for other buyer groups, such as first-home buyers, who remain active in the market. This increased investor activity could place further pressure on already limited supply levels, particularly in capital cities.”

Nevertheless, the market is softening in some places: national home values rose by just 1% in the September quarter, the lowest rise since March last year. Ezzy also added that the annual growth rate has slowed to 6.7% from a high of 9.7% earlier in the year, which was “indicative of a cooling market”.

House values have risen by a modest 0.4% in September, as the upswing in the national property market continues to lose momentum and new listings increase.

According to CoreLogic’s Hedonic Home Value Index (HVI), it has been a sluggish start to spring for a number of capital cities, with values declining in Melbourne by 0.1%, while Hobart and Canberra also recorded small declines of .4% and .3% respectively in September. Perth and Adelaide continued to outperform other capital city markets, with the Western Australian capital rising 1.6% for September alone, while Adelaide housing values lifted by 1.3%.

Across the entire September quarter, national values rose by 1%, which CoreLogic notes its the lowest rise in the national Home Value Index (HVI) over a rolling three-month period “since March 2023 when the market was moving through the early phases of the current upswing”.

CoreLogic’s director of research, Tim Lawless, noted: “The immediate outlook for housing markets is for further growth in housing values, at least at the macro level, but a continuation in the gradual loss of momentum and increasing diversity across the cities and regions.”

Managing Director of SQM Research, Louis Christopher, said total new for sale listings were up 5.4% in September.

“Distressed listings activity still remains benign, which is somewhat surprising given the ongoing elevated interest rates borrowers are facing,” he said.

“The housing market remains patchy in our view but clearly there are active buyers participating, which is driving stable prices.”

Tenants will continue to face rental increases and difficulty securing tenancies, as researchers warn the current crisis will not subside for years.

According to managing director of SQM Research, Louis Christopher, supply of rental properties remains tight across Australia.

“Overall, the national rental market remains in severe shortage and barring some exceptions, is not expected to materially soften out of the rental crisis for some years,” he said.

However, Christopher added that much of the structural rental shortage “has now been priced into the rental market and so I do believe the days of 10% to 20%-plus annual rental increases have come to an end”.

Christopher’s comments come as new research shows that Sydney’s rental vacancy rate slightly dropped to 1.6%, with just 11,893 rental dwellings vacant, while Melbourne’s vacancy rate slightly increased by 0.1% to the same level as Sydney’s. Brisbane, meanwhile, continued to experience strong demand with a low vacancy rate of 2.5%.

In terms of rental prices, the national median weekly rent for a dwelling is now $719.80, with Darwin showing the most significant monthly growth, particularly in house rents, which rose by 9.6%.

In what will be disappointing news for first home buyers, Australia’s housing market recorded its 19th-straight rise of .5% for the month of August, although there are signs the market is cooling.

According to the CoreLogic monthly Home Value Index (HVI), the median-valued home is now at $802,357, up from $798,207 in July. Nevertheless, gains were modest across August, with the biggest rise recorded in Perth at 2%, followed by Adelaide and Brisbane 1.4 and 1.1% respectively.

Sydney values grew by .3%, while four capital cities declined in August value with a -.4% dip in Canberra, a -.2% decline in Melbourne and Darwin, and a -.1% dip in Hobart.

As CoreLogic noted “the pace of growth is showing clear signs of slowing with the quarterly increase in national home values (1.3%) now less than half the rate of growth in the same three-month period of 2023 (2.7%)”.

“Looking forward, the national housing market should continue to see modest value increases to the end of 2024,” CoreLogic said in a statement.

“While there is a clear slowdown in growth, housing values are underpinned by a longer-term lack of new supply, which has been exacerbated recently by ongoing constraints in the residential construction sector.”

CoreLogic’s head of research, Eliza Owen, added that the growth in Perth, Brisbane and Adelaide was running out of steam.

“Housing values cannot keep rising at the same pace in the mid-sized capitals of Perth, Adelaide and Brisbane when affordability is becoming increasingly stretched, particularly in the context of elevated interest rates, loosening labour market conditions and cost of living pressures,” she said.

The growth in regional housing values is starting to ease as budgets tighten in response to persistently high inflation and interest rates.

According to the latest CoreLogic figures for regional housing, the quarterly growth rate in regional dwelling values has slowed from a recent high of 2.2% in April to just 1.3% in July. Capital cities have also experienced a slow-down in growth, from 2% to 1.8% over the same period.

“As the higher cost of listing and high interest rates environment continues to put pressure on households’ balance sheets, it’s likely we’ll continue to see values and rents moderate in the coming months,” CoreLogic Australia economist, Kaytlin Ezzy, says.

However while regional areas of Victoria and NSW were slowing, parts of Queensland and WA are bucking this trend.

Values in Gladstone, for example, rose 9.2% over the three months to July, while Townsville was up 7.8%. Western Australia was also a strong performer, rising 7.2% and 6.7% in Bunbury and Busselton respectively.  These regions also recorded annual growth above 20%.

Melbourne housing values have slumped in recent months, with new data showing that properties in Adelaide on average are almost worth as much as homes in Australia’s second-largest city.

According to CoreLogic’s HVI (Home Value Index), Adelaide and Perth rose by 5% and 6.2% respectively for the June quarter. It means that the average home in Adelaide is now worth $776, 597, while Melbourne, soon to be Australia’s largest city by population, fell by .9% over the same period to $781, 949. Hobart and Darwin also recorded declines of .8% and .3% respectively for the June quarter.

Mid-sized city Brisbane, meanwhile, was up 3.8% for the June quarter and 1.1% for the month of July alone. All up, the national housing market grew by 1.7% for the June quarter and .5% in July. Over the past year, this translates into an annual rise of 7.6%.

The Australian property market continues to set eye-watering price records, with the latest Domain House Price Report revealing a surge in the value of units and houses across the country.

While the pace of growth has slowed since 2023, record house prices have been achieved in key capital cities of Sydney, Brisbane, Adelaide and Perth across the June quarter of 2024. In Sydney, house prices gained another $21,000—up 1.3%—to $1.66 million. Brisbane is on track to cross the $1 million threshold for average house prices next quarter, coming in at $976, 464—a rise of 4%. Perth house prices gained 6.6% to $852,240 for the quarter, while Adelaide prices shot up to $929,972, a rise of 2.6% for the quarter, but an annual rise of 16%.

Melbourne also made some gains for houses, hitting $1,068,805, which represents a quarterly rise of 1.7%.

However, it was a mixed bag across the apartment sector. In Sydney, unit prices fell for the first time in 18 months, dropping .6% to $797,212. It was a similar story in Melbourne and Darwin with unit prices falling 1.7% and 3.4% respectively. On the other hand, units rose by 7.8% in Perth and 3.2% in Brisbane.

Domain chief of research and economics, Nicola Powell, said there were few signs of relief on the horizon.

“Given that building approvals across the country have been on a declining trend since 2021—an indicator of constrained supply—the price growth trend is unlikely to reverse itself,” she said.

However, Powell added that the pace of price growth “may be tempered by higher cash rates and inflation in the long run, so there might be some relief in store for those looking to enter the market”.

The report came as the Australian Institute for Health and Welfare released new figures showing the declining trend of home ownership across Australia. Data from the 2021 Census revealed a home ownership rate across all age groups of around of 67%, down from 70% in 2006.  However, the real disparities were evident across younger age groups. The rate of home ownership among 30 to 34-year-olds was 64% in 1971, compared to 50% in 2021. It was even worse for Australians aged 25–29, dropping from 50% in 1971, compared with 36% in 2021.

Some three-quarters of first home buyers in Australia are failing to raise the 20% deposit required for a home loan, with many taking out Lenders Mortgage Insurance (LMI) or tapping the bank of mum and dad to make up the shortfall.

The results were revealed in the July Helia Insurance study of more than 1,000 first home buyers across the nation, in which almost 90% agreed that it was harder than ever to buy their first property. Some 55% of these buyers used LMI to access a deposit, while 45% relied on the bank of mum and dad—up from 34% last year. Others (48%) drew upon government assistance and schemes, while 39% were working overtime to save more money.

The study also revealed the ways in which first home buyers were trying to save, including 68% cutting back on dining-out and hobbies, 60% holidaying less, and, most concerning, 45% of first home buyers limiting their electricity use (heating and cooling) to save cash. Almost one-third were cutting back on medical treatment or personal grooming.

The high cost-of-living and expensive housing market is seriously affecting first home buyers’ ability to save: 18% were currently not saving any money and 35% of those surveyed were considering giving up on buying a home.

Australia’s housing market has continued its upward trajectory, with dwelling values rising .7% in June or 8% over the past 12 months as supply tightens.

According to CoreLogic’s latest Home Value Index (HVI), the “mid-sized capitals” of  Perth and Adelaide showed the most growth, with values surging another 2%, and 1.7% respectively for June and 23.6% and 15.4% for the year. Growth also continued to climb in Brisbane, up 1.2% for June and 15.8% for the year. However, as CoreLogic noted, these mid-sized cities were “continuing to show severe housing shortages with listings holding significantly below average in June”.

CoreLogic’s research director, Tim Lawless, said the national index had risen between .5% to .8% month-on-month since February.

“The persistent growth comes despite an array of downside risks including high rates, cost-of-living pressures, affordability challenges and tight credit policy.  The housing market resilience comes back to tight supply levels which are keeping upwards pressure on values.”

Meanwhile, Melbourne and regional Victoria bucked the trend, and were down -0.2% and -0.3% respectively over the month.  Values in Hobart were “relatively flat” in June, rising a mere .1%.

Perth and Brisbane are the leading the property market boom among capital cities, posting healthy price rises that outshine the traditional prime markets of Melbourne and Sydney, according to CoreLogic data.

Overall, home values have risen by more than 35% since the Covid pandemic in 2020, but there are large disparities between those cities that are rising and those that are treading water or going backwards, notes the Unpacking Multi-Speed Conditions in Australia’s Housing Markets CoreLogic report.

The Western Australian capital posted a 22% annual surge, according to CoreLogic, while Brisbane—awash with Covid-era refugees from down south—has overtaken Canberra to become Australia’s second most expensive city, rising 16% over the past year. Adelaide was close behind at 14%, followed by Sydney (7%), Darwin (3%) and Canberra (1.9%). Melbourne and Hobart rounded out the list at 1.8% and -.1% respectively.

“It could be that when shifts in the market happen, such as a negative demand shock from rate rises, that some cities are more responsive than others, creating a more dramatic range in capital growth outcomes in the short term. In the case of interest rate rises, it is understandable that an expensive, highly indebted market like Sydney would see a quicker response in value changes,” the report noted.

The report also cautioned: “The highest-performing markets have generally come off a low base, with housing conditions and demographic trends relatively weak over the years preceding the pandemic.”

Meanwhile, The Chapman University Frontier Centre for Public Policy’s Demographia International Housing Affordability report has classified Sydney, Melbourne, Adelaide, Brisbane and Perth within the 25% of least affordable  cities in its global list of 94 markets included in the study.

The study, which focuses on whether households on average incomes can purchase median-priced homes, looks at property markets in Australia, Ireland, New Zealand, Singapore, Canada, Hong Kong, the UK and the US.

Banks and lenders have been accused of “effectively abandoning customers who needed their support” and shortchanging mortgage holders who need hardship assistance, in a scathing ASIC report on banks’ hardship programs.

In its report, Hardship, hard to get help: Lenders fall short in financial hardship support, ASIC found that lenders are failing to identify customers that need hardship support; were applying a cookie-cutter model in dealing with them; failed to communicate with customers properly; and have inadequately dealt with hardship scenarios relating to family violence. The report also found 40% of customers who received hardship assistance via the reduction or deferral of payments, fell into arrears immediately after the assistance period ended.

Under Australian law, mortgage holders have the right to ask for a a hardship repayment arrangement, and the creditor—in this case the bank or credit union—must respond to the mortgage holder’s request and make a reasonable repayment arrangement.

ASIC Chair Joe Longo said the regulator “will not hesitate to take enforcement action to protect consumers”.

“The report highlights failures of lenders to identify customers in financial stress, use of cookie-cutter approaches to dealing with hardship requests, as well as onerous assessment and approval processes,” he said.

“For people who reach out to their lender to signal they need support, this can be devastating. Too many Australians in financial hardship are finding it hard to get help from their lenders and it’s time for meaningful improvement.”

It came as financial educator aka The Barefoot Investor, Scott Pape, told his subscribers that the federal Budget’s energy rebate—which is not means-tested and will flow to all households—may in fact stoke inflation and keep the cash rate higher for longer.

As a result, homeowners should  “panic… panic early”, Pape wrote.

“Ask yourself what would happen if you lost your job, or you got sick, or interest rates went up,” he said.

“In other words, you need to do something that (Treasurer Jim Chalmers) hasn’t been able to do: make some hard decisions, right now.”

Tenants continue to bear the brunt of Australia’s housing market woes, with annual rent growth coming in at 8.5% in the year to April, forcing many to move out farther afield.

According to figures from CoreLogic, a 0.8% rise in the month of April has pushed Australia’s median rent to a new record high of $627 per week. In Sydney, the median weekly rent is $770 per week, a growth of 9% over the past year.

And it seems the pace is gaining momentum with annual rent growth through 2024 up from 8.1% in the year to October to 8.5% in the year to April.

CoreLogic head of research, Eliza Owen, noted that rents were going up faster in areas between 30km and 40km from city centres.

“Part of the reason for the re-acceleration in rents nationally could be due to renters being forced into more affordable, peripheral housing markets as they become priced out of more desirable and central metropolitan locations,” she said.

It comes as the housing market continues to record rises in property values this year, although at a slightly more subdued pace than the rental market. CoreLogic’s Australian national home values index recorded a 0.6% rise in April, which as CoreLogic noted, was on par with the pace of gains recorded in both February and March.

Housing values are up 11.1% or approximately $78,000 since the dip in January last year.

CoreLogic research director, Tim Lawless, pointed out that housing performance two years before and after the RBA rate hiking cycle has been vastly different. Home values have risen just 2.8% since the RBA began hiking rates 24 months ago, which Lawless concedes was “a legacy of the 7.5% fall between May 2022 and January 2023”.

He added: “This contrasts sharply with the substantial 31.7% increase observed in the preceding two years.”

The total value of Australian residential real estate rose to $10.4 trillion at the end of February, which, according to CoreLogic is up from $10.3 trillion in the previous month and represents a new high.

In percentage terms, it means the pace of quarterly national home value growth rose to 1.3% over the three months to February, which is trending upwards from the 1.0% growth over the three months to January. National values were up 8.9% over the past 12 months, which is the highest annual increase since the second year of the pandemic when values rose 10.8%.

According to CoreLogic, Perth continues to lead capital growth performance in the greater capital city markets, with values 18.3% over the past 12 months. Interestingly, the largest growth was in cheaper housing, with values increasing in the country’s most affordable suburbs by 2.4% over the three months to February. This is compared to a rise of .7% in mid-priced dwellings while the upper quartile recorded a milder 0.6% increase.

CoreLogic research director Tim Lawless said that historically, the more expensive houses tends to lead the price cycles, both into the upswing, but also into downturns.

“This trend is most evident in Sydney, Melbourne and, to a lesser extent Brisbane, where upper quartile values clearly led the 2023 upswing through the first half of the year,” he said.

“The trend hasn’t been evident in Perth or Adelaide where lower quartile home values have consistently recorded a faster pace of capital gains through 2023 and the first two months of 2024.”

It has often been said that houses hold their value more than apartments or units, and new data shows this has overwhelmingly been the case over the past four years.

According to CoreLogic data, the average difference between median capital city house values was just 16.7% at the start of the pandemic in March 2020. By the beginning of 2024 that gap, or house premium as it’s known, had ballooned to 45.2%, which is roughly $293,950.

CoreLogic research director, Tim Lawless, said several factors were behind this out-sized growth in the value of detached dwellings.

“The house premium rose sharply through the pandemic upswing as more people sought out space and were more willing and able to live further afield in our cities,” Lawless said.

“While we saw the premium contract through the early part of the rate hiking cycle as house values fell more than unit values, across the combined capitals the gap between house and unit values has since rebounded to a new record high as house values once again rise at a faster pace than units.”

Since March 2020 to January this year, capital city house values have increased by 33.9% or by $239,000. In contrast, unit values over the same period are up only 11.2% or $65,235. Sydney has experienced the largest gap between house and unit values, coming in at 36% over that period.

The Prime Minister, Anthony Albanese, is resisting calls to rein-in Australia’s generous property tax breaks, in response to pressure from the Greens and housing advocacy groups to scrap negative gearing.

The Greens Party, which holds the balance of power in the Senate, is pushing for changes to negative gearing in return for the party’s support of the Government’s help-to-buy scheme and its passage through the Upper House.

The Greens’ housing spokesperson, Max Chandler-Mather, has taken a strong line on renters’ rights, and is one of only a handful of MPs who rent. Most federal MPs, more than 65% according to Nine newspapers, own at least one investment property, underscoring the housing wealth divide within Australia.

“The system is stacked against renters and first home buyers,” Chandler-Mather said.

“Pressure works. Labor changed their position on stage-three tax cuts and now they need to change their position on negative gearing and capital gains tax.”

The Everybody’s Home campaign, a coalition of welfare and housing organisations, also called on the government to scrap negative gearing and the capital gains discount, but the Prime Minister has ruled out any changes, saying he has “no intention” of making changes to property taxes.

Labor notoriously took the issue of negative gearing to the 2016 and 2019 federal elections, promising to wind back tax breaks on new investment homes, and was resoundingly defeated in the polls. Labor has since scrapped the policy.

The calls came as CoreLogic’s value of residential real estate was an estimated whopping $10.3 trillion at the end of January, with regional dwelling values now rising at 1.2% for the month compared to 1% in the capitals.

While the pace of rent rises is showing signs of easing, it remains a significant burden on tenants. Australian rent values increased a further .8% over the month of January, which as CoreLogic noted, was up from the .6% increase recorded in December.

“This uptick has seen annual growth in rent values accelerate slightly, from the 8.1% lift seen over the year to October 2023, to 8.3% in January,” CoreLogic noted in its Housing Chart report.

The pace of rental increases is easing in Australia, with signs that tenants may face some relief this year from more than two years of rent hikes, according to CoreLogic.

ABS figures released this week revealed that the rental component of housing costs rose 7.3% in the December quarter, down from 7.6% in the September quarter. This was the first sign “of rent inflation easing in two-and-a-half years”,  CoreLogic’s head of research, Eliza Owen, said. The ABS also noted that the rate of growth in rents this quarter was moderated by increases in Commonwealth Rent Assistance, which helped offset costs to tenants.

“The rate of increase in rents paid is finally slowing, suggesting some hope for tenants that the rental market could turn a corner in 2024,” Owen said. Although she also noted that 7.3% CPI “is still well above the pre-Covid decade average of 2.3%”.

Housing makes up around 22% of the CPI basket that is used to calculate inflation—the largest weighting of all components within the CPI calculation— and consists mainly of costs of construction of new dwellings and rental increases  by landlords.

Meanwhile, Australia’s housing market continued to record growth, with CoreLogic’s national Home Value Index (HVI) rising 0.4% in January. This was a slight increase on the 0.3% increases recorded in November and December, and marks a year of positive growth in housing values.

The Australian property market has seen its ups and downs over the past few years—a Covid-era boom followed by a 12-month slump—but for tenants it has been the same depressingly similar story of sustained rent rises.

According to CoreLogic’s Housing Chart Pack, rent values have increased at more than 8% for the past three years, and over the past decade, rents have outpaced dwelling values on three occasions—in 2023, 2022 and 2018. The figures came as CoreLogic revealed that overall for the year 2023, home values increased 8.1% in the calendar year, after falling 4.9% the previous year. However, this figure is still much lower than the high watermark of 2021 when the average value of dwellings grew by 24.5% across the nation.

The shining star of the past year has been Brisbane, which in December overtook Melbourne in average dwelling value by $7,000 to hit $787,217. This is partly due to Melbourne’s higher concentration of unit stock, which is usually of lower value and therefore drags down the median, but other factors, such as Australians’ lifestyle preferences, play a large role too.

“The reason for such varied capital growth outcomes may be partly due to lifestyle factors, where the appeal of South East Queensland rose through the pandemic—dwelling values have risen by more than 50% since the start of the pandemic,” CoreLogic’s head of research, Eliza Owen, noted.

“The normalisation of remote work for many professionals made interstate migration to Queensland more feasible, while Melbourne’s extended lockdowns from March 2020 through to October 2021 may have prompted people to leave the city.”

It will come as little surprise to many of us that housing affordability has worsened in Australia over the past year, with the time taken to save for a standard 20% deposit in Sydney stretching to 12.6 years, according to the annual ANZ CoreLogic Housing Affordability Report.

Nationally, the figure was slightly lower at 10 years to save for a deposit, although there was some surprise results in Melbourne—tipped to become Australia’s biggest capital city. In the five years to September, the time it took to save for a deposit in Melbourne lowered from 10.2 years in September of 2018 to 9.6 years today.

As the report authors noted, the Sydney-Melbourne price divide widened throughout much of this year.

“The more modest movements in Melbourne dwelling values likely comes down to more supply of dwellings over the past 15 years,” the authors wrote.

“The difference in median values between Sydney and Melbourne reached a series high of $343,000 as of October this year. For Sydney more broadly, this may be leading to poorer outcomes for key workers, and may be contributing to negative internal migration trends.”

The report also noted that the regional housing market of Australia had recovered, and “affordability metrics are now more comparable with capital city markets than they were pre-pandemic”. Perhaps most alarmingly, the portion of income required to pay down a new home loan has risen to 46.2%—up from  29.0% in March 2020 at the onset of the pandemic— placing many households in mortgage stress territory.

The nation has been facing a rental crisis for some time, with many landlords passing on their rising mortgage repayments to tenants. The latest release of the Rental Affordability Index—published annually by SGS Economics and Planning, National Shelter, Brotherhood of St Laurence and Beyond Bank—found the crisis is getting worse, and is now affecting regional areas as well as capital cities. 

“The findings show little to no affordable options for vulnerable renters in Australia, including pensioners and single parents,” the index reads. 

It also showed that rental affordability has worsened in all major Australian cities and regions, except for Hobart and Canberra.

“Increased housing demand in certain regional areas brought on by Covid-19 related population moves has seen rental prices spike to unaffordable heights across the country,” the report states.

The least-affordable place of all regions and capital cities to rent is regional Queensland, with rentals coming in at an average $553 a week. Spread out across a year, this equates to 30% of the average Australian income, placing these Australians within the category of ‘rental stress’.

“The Rental Affordability Index revealed that renters in every capital city are in a worse position than they were in 2019, before the start of the pandemic,” Ellen Witte, SGS Economics and Planning principal and partner, and the lead author and analyst of the report, explained. 

Unfortunately, this un-affordability has spread from the cities and into the regions—albeit to a lesser extent. CoreLogic’s most recent Quarterly Regional Market Update—which analyses value and rent changes across the country’s largest 50 non-capital Significant Urban Areas (SUAs)—shows rising interest rates, higher cost of living pressures and normalising internal migration patterns appear to have had an impact on rents.

CoreLogic economist, Kaytlin Ezzy, said growth in regional rents has lagged the capitals, but was still keenly felt.

“Fuelled by strong net overseas migration, smaller household sizes and limited stock, the combined capitals have seen rents rise 1.8% over the past three months. In contrast, normalising migration patterns have seen regional rents record a milder 0.8% rise,” she said.

Related: How To Save Money As Cost Of Living Rises

Meanwhile, a new survey from Flatmates.com.au, revealed that of more than 10,300 respondents across the nation, some 48% are living in shared accommodation because they cannot afford to live on their own. 

The survey revealed more people are turning to share-house living to alleviate affordability pressures amid the cost-of-living crisis and an incredibly tight rental market.

Flatmates.com.au community manager, Claudia Conley, said: “Australians are looking for new ways to navigate the rental crisis and tackle the rising cost of living. Over the past year, our audience has grown in size and diversity, and with the peak season for share accommodation at at our doorstep, we expect demand for shared house living to grow.”

Property experts have voiced concern over the sharp rebound in Australia’s property market, warning that Australia’s first home buyers are increasingly funded by the “bank of mum and dad”, which is entrenching intergenerational wealth.

A report last week by Domain revealed that Australia’s housing market has all but fully recovered from the downturn of last year, and that by the end of this year prices will have bounced back to new record highs.

“These record-high numbers are driven by a series of factors: interstate migration, record levels of overseas migration, a tight rental market, and a chronic undersupply,” said Domain’s chief of research and economics, Dr Nicola Powell.

While a boom in population is often cited as the cause, many property economists are also pointing to the large capital inflows from “the bank of mum and dad”, which are able to weather the shock of 12 interest rate rises since May last year.

The Grattan Institute’s, Brendan Coates, told Nine newspapers that intergenerational wealth was creating the conditions for yet another property boom and further entrenching inequality.

“People are less sensitive to interest rates if people are relying on family money to get into the market,” Coates said. “If that’s what’s driving prices that’s really concerning—it implies a growing divide between haves and have-nots.”

Australia has the highest level of mortgage stress in the developed world, with fresh figures from the IMF highlighting just how in debt borrowers have become in service to the Great Australian Dream.

In its October Global Financial Stability Report, the IMF noted that Australians on average devote 15% of income to paying off loans, which puts them ahead on the mortgage stress ladder of Canada, Norway and The Netherlands.

Previously, the Australian National University has calculated that if the RBA increased the cash rate by another 50 basis points—or two more rate rises—then Australians would need to pay 40% of their income towards their home loan, as well as other loans.

The IMF noted that further monetary tightening may be required: “With core inflation still high in many advanced economies, central banks may need to keep monetary policy tighter for longer than is currently priced in markets. In emerging market economies, progress on lowering inflation appears to be more advanced, though there are discrepancies across regions.

“Most notably, the global credit cycle has started to turn as borrowers’ debt repayment capacity diminishes and credit growth slows. Risks to global growth are therefore skewed to the downside, similar to the assessment in April.”

The IMF report came as the RBA revealed the proportion of owner-occupiers whose essential expenses and mortgage costs exceeded their income in July 2023 was around 5%—up from around 1% in April 2022.

“Australian households and businesses are generally well placed to manage the impact of higher interest rates and inflation, supported by continued strength in the labour market and sizeable savings buffers,” the RBA has noted.

“However, this resilience is unevenly spread. Some households and businesses are already experiencing financial stress, and the squeeze on household budgets is likely to continue to build.”

Australian property prices are rebounding strongly, with CoreLogic’s Home Value Index (HVI) notching up an average .8% rise in prices in September.

It’s the eighth month in a row that the index has recorded a rise, signalling the property market slump that marked the latter half of 2022 is well and truly over. The quarterly pace of growth came in at a healthy 2.2%, although it was slightly slower than the 3% recorded in the June quarter, owing to an increase in stock coming to market. The .8% monthly rise was up slightly on the .7% recorded in August.

According to the HVI, Adelaide recorded the highest capital gain for the September quarter at 4.3%, followed by Brisbane at 3.9% and Perth at 3.6%. Meanwhile, Hobart’s price values were  down .2% over the quarter. For the month of September alone, Adelaide was also the strongest capital city at 1.7%, beating Sydney and Melbourne at 1% and .4% respectively. Brisbane and Perth were also strong performers, with each capital city recording a growth rate of 1.3% over the month of September.

CoreLogic’s head of research, Tim Lawless, said at the current rate of growth, we are likely to hit a new high by November.

“We have already seen dwelling values reach new record highs in Perth and Adelaide.  Brisbane looks set to reach a new record high in October, with home values currently only 0.6% below their previous peak.  Hobart and Canberra have the furthest to go before staging a nominal recovery, with dwelling values remaining 12.4% and 7% below their cyclical highs from last year,” he said.

Lawless noted that the premium sector, after leading the recovery of the Australian property market in the early days “might be losing some steam”. He added that the broad middle of the market is now recording the highest growth rates.

“This shift is partly attributable to the lower-value capitals, such as Perth and Adelaide, recording a faster rate of growth, however even in these cities it is the lower quartile that has outperformed,” Lawless said.

“Possibly we are starting to see renewed affordability challenges deflecting more demand towards the middle of the market where barriers to entry are lower.”

Rent has been increasing across the nation for a long time now, with the rise of prices in July marking the 35th consecutive national monthly increase. As Australians look for ways to lower their rent, such as by downsizing or entering into share-housing agreements, there may be some good news on the horizon.

According to a recent CoreLogic report, slowing rent rates could be a key trend in the housing market for 2024 thanks to rent prices flattening out—albeit at high levels, the report notes.

The three reasons that CoreLogic expects to see rent prices easing in 2024 are:

1. Potentially lower interest rates

Annual growth in rent values and interest rates move together over time, the report explains. Since it is forecast that there will be a decline in the cash rate in 2024, economists are also predicting this will flow onto the overall housing sector.

“A reduction in interest rates could increase demand from housing investors, and increased investment purchases add to rental supply, which may serve to lower rent growth,” CoreLogic’s head of residential research, Eliza Owen, explained in the report.

2. Softer income growth

Another potential reason for rent prices to lower is softer income growth. During the pandemic, household income growth shifted much higher, which allowed occupants to lease more spacious properties or move out of share house agreements, rather than the recent trend of moving into them.

Now, if income growth continues to slow in the next year, renters may look to adjust their housing situation and continue the trend of higher occupants inside a single dwelling; this would therefore bring down the average rent for a individuals or couples residing with others.

3. Rental affordability is reaching its peak

Simply put, if rent prices continue trending upwards, Australians will be further locked out of the rental market. According to CoreLogic’s data, rents have increased a staggering 29.3% since August 2020, which is the equivalent of around $134 a week.

But if more of us enter into share housing agreements or there is an uptick in internal migration patterns, the rental market may see an ease in demand. If demand lowers, it would bring down growth in national rents, Owen says.

It’s no secret that Australians have a love affair with property, but the size of the market has officially reached a level that eclipses the market capitalisation of some of the biggest tech firms in the world.

According to new data from CoreLogic, the value of the Australian property market rebounded to $10 trillion at the end of August, which as CoreLogic points out, is the first double-digit figure since June 2022.

In a research paper titled The Value of Australia’s Housing Market Just Hit $10 Trillion Again. How Is This Possible?, CoreLogic said the increase was a result of values rising steadily over time—the median home value in Australia reached $732,886 at the end of the month—and housing stock increasing to around 11 million properties.

“The national recovery in home values began in March this year, with values rising 4.9% through to the end of August,” CoreLogic said in the paper.

“This recovery has wiped out around half of the preceding downturn between April 2022 and February 2023, when national home values fell -9.1% peak to trough. Home values are now just -4.6% from the peak in April 2022.”

As finance commentator, Chris Kohler, pointed out, the $10 trillion figure, is more than three times the total value of Australians’ superannuation savings, which is worth $3.5 trillion, while the value of tech giant Apple is around $4.4 trillion.

The fact that many Australians have money invested in the residential property market explains why successive governments have been loath to tinker with generous property tax breaks— in the form of the CGT and negative gearing—and why former opposition leader Bill Shorten’s pledge to wind back negative gearing on new homes to make them more affordable likely cost him the election.

Property values have risen for the sixth month in a row, recording growth of .8% across Australia for August, according to CoreLogic’s Home Value Index (HVI).

The figure was slightly higher than the July increase of .7%, and was led by Brisbane with a lift of 1.5%, followed by Sydney and Adelaide each with increases of 1.1%. Every capital city except Hobart, down -0.1%, recorded a rise in values over August.

The national HVI is up 4.9% since February, which as CoreLogic points out, adds approximately $34,301 to the median dwelling value.

CoreLogic Research Director, Tim Lawless, said that while the overall trend was positive, there were some pockets of poor performance. For example, while Sydney has gained 8.8% since January this year, and Brisbane is up 6.2% since February, other markets were not as resilient.

“At the other end of the scale, some other capital cities are better described as flat, with Hobart home values unchanged since stabilising in April, while values across the ACT have risen only mildly, up 1.0% since a trough in April,” Lawless said.

“These are also the only two capital cities where advertised supply is tracking higher than a year ago, suggesting a rebalancing between buyers and sellers is a key factor contributing to the stability of values in these regions.”

Lawless noted that across Australia’s cities, houses have recovered faster than units.

Despite an uptick in house prices in recent months, many regional areas of Australia are posting annual declines in housing vales, according to CoreLogic’s quarterly Regional Market Update.

According to the update, which analyses 25 of largest non-capital city regions in Australia, 18 areas recorded an annual decline in house values over the year to July 2023. This is despite the regions posting modest growth in recent months.

The areas hit hardest were in the “NSW lifestyle markets” of Richmond-Tweed, down -20.4%, as well as the Southern Highlands and Shoalhaven, which dropped -15%.  Meanwhile, in Victoria, the falls were led by Ballarat (-11.2%) and Geelong (-10.4%).

CoreLogic Australia Head of Research, Eliza Owen, said despite regional Australian dwelling values rising over the past five months, values are -5.6% below this time last year.

“While the market is starting to recover, value growth is largely being led by capital city markets, reflecting milder housing demand across regional Australia as demographic patterns normalise,” Owen said.

“Year-on-year growth was hard to find across regional Australia in the past 12 months. The markets that saw an increase were largely more affordable, and were more rural. Presumably, lower value assets have been more resilient to increases in interest costs because they require lower indebtedness.

“Additionally, targeted migration programs also tend to focus on parts of regional Australia as a pathway to permanent residence, so some of the more rural, regional parts of the country may have seen sustained housing demand as international travel restrictions have lifted through 2022.”

National home prices are now sitting 1.36% above July 2022 levels, thanks to seven consecutive months of growth. 

According to the latest Home Price Index report from PropTrack, national home prices rose 0.16% in July, helping to secure the positive annual growth compared to this time last year. 

All capital cities–except Canberra and Darwin–reported increases in prices, with Adelaide showing the highest growth increase of 0.62%. Adelaide’s home prices are now up 5.27% from where they were a year ago. 

Brisbane had the second highest growth rate in July, reporting a 0.37% rise, closely followed by a 0.36% rise in Perth. 

Sydney continues to lead Australia’s house pricing recovery, the report states, with a 0.28% increase in monthly growth and a median house value of $1,046,000.

Meanwhile, Melbourne reported a monthly increase of only 0.01%. 

In comparison to regional areas, home price growth has been much stronger in the capital cities. Home prices in the capitals have increased 3.60% since December, while only rising 0.81% in regional areas. 

“This trend continued in July, with regional areas falling 0.03% and capital city prices lifting 0.23%,” the PropTrack Home Price Index reports. 

The report continues on to state that with July marking the seventh consecutive month of national home price growth, the falls recorded in 2022 have been reversed despite a hefty increase in rate rises. 

It is thanks to stronger housing demand and a limited flow of new listings that this impact of interest rate rises has largely been offset, PropTrack reports. 

Yet PropTrack senior economist Eleanor Creagh states that the full impact of recent rate rises is yet to be felt, and the potential for further tightening remains a headwind for the market. 

“However, interest rates are nearing their peak, if not there already. This is likely to sustain

confidence and maintain the lift in home prices, resulting in more markets returning to positive annual price growth.”

Australia’s housing market has shown signs of recovery in the June quarter, with combined capital house prices rising almost four times faster than the previous quarter. According to Domain’s House Price Report for June 2023, it’s the steepest gain the housing market has seen since 2021 and it follows five consecutive quarters of decline. 

Since December 2022, combined house prices across capitals have now recouped 3.4% of the -5.6% value that was lost during the downturn earlier that year. That’s $35,000 of the $60,000 value lost. This means that the housing market is “roughly halfway into recovery”, according to Domain. 

Sydney has shown the greatest acceleration in house prices, reporting a rise of 5.3% quarter-on-quarter, with the median price now being $1,535,869. Adelaide house prices rose 2.8% and Perth rose 2.2%, with capital city prices at an all-time high. 

Meanwhile, Melbourne reported an increase of 0.4%, Brisbane an increase of 0.9%, while Hobart notched up a 1.2% rise. Darwin, meanwhile, lifted by 1.9% for the quarter.

Canberra was the only capital city that didn’t experience prices rise. Looking forward, Domain says the recent pause on interest rate hikes will provide some stability to the market–at least in the short term. 

“With inflation remaining above the RBA’s target band, one further hike is almost certain, but it does mean the cash rate is close to a peak,” the report stated.

“This could have a positive sentiment flow to consumers and the push needed for sellers to continue to return to the housing market.” 

Rent values increased in more than 90% of Australian markets in the past year, according to new data by CoreLogic, which highlights how tough the housing market is for renters.

The suburb-level analysis of CoreLogic’s Mapping the Market interactive tool shows more than nine in 10 house and unit markets across the country have experienced an increase in rents over the 2022-23 financial year, with some two-thirds of unit tenants slugged with an annual increase of 10% or more. More than one-third of tenants in houses experienced a rent hike of 10% or more.

In Adelaide, Perth and regional Western Australia, 100% of suburbs analysed recorded a year-on-year increase across both houses and units, while in Brisbane, Adelaide, Perth and Darwin, 100% of unit markets recorded rent value increases.

Across the top 20 unit rental markets, all are located in Sydney, except for Travancore in Melbourne. Increases of more than 30% have been recorded across Kingsford and Haymarket in Sydney, while increases of around 20% were widespread across the city’s suburbs. Meanwhile, across Perth rents are now 13.4% higher over the past year and 41.8% higher than at the beginning of the pandemic.

CoreLogic economist Kaytlin Ezzy said a shortage in rental listings and higher interest rates for mortgage holders have had a flow-on effect to rentals.

“Investors tend to shy away from the housing market during negative economic shocks. The sharp rise in interest rates has coincided with a -23.6% fall in new housing investment lending between April 2022 and May this year, and this includes a slight recovery in investment lending in recent months, which has lifted 10% from a low in February this year,” she said.

“On the demand side, record levels of overseas migrants, many of whom rent in inner-city unit precincts, has bolstered rental demand this year, causing an imbalance between rental demand and supply.

There was some outlier areas however, that recorded negative rental growth. In Sydney, Long Jetty (-3.7%), Wyong (-2.5%) and The Entrance (-0.03%) recorded slight falls in the value of apartment rental listings, while two markets in Melbourne (Rosebud West -2.3% and Hastings -0.5%) and one market in Hobart (Claremont -0.2%) also recorded a fall in units.

While it’s been a turbulent time for property owners with interest rate rises impacting mortgages, experts say the country remains a landlord’s market as national rent values continue to increase. 

CoreLogic’s most recent Quarterly Rental Review reveals that national rent values rose 2.5% in the June quarter, with Melbourne losing its title as the cheapest rental market. 

Adelaide now takes that crown, with the typical dwelling costing $549 per week compared to $551 per week in Melbourne. 

Meanwhile, Sydney maintained its position as the most expensive capital city, clocking a median weekly rental value of $733 or an eye-watering 8.1% increase in the June quarter.

Nationally, rents are now 27.4% higher than they were at the beginning of the pandemic, which is an equivalent to an increase of $127 per week on median dwellings, the report shows. 

CoreLogic Economist and report author Kaytlin Ezzy said there was a national shortfall of approximately 47,500 rental listings recorded over the four weeks to June 3, 2023, and notes that while there has been a slowdown in the pace of national rental growth it remains “well above average”.

“The softening in rental growth occurred in spite of an ongoing surge in overseas migration while a slowdown in the pace of national rental growth and a continued shortage in rental supply, suggesting an increasing portion of tenants are reaching their affordability ceiling,” Ezzy said.

Meanwhile, Domain’s Rent Report for the June quarter reinforces this sentiment, highlighting that “Australia’s rental market remains locked in favour of landlords, as limited supply pushes asking rents to further historic highs”. 

Roughly 127,000 additional dwellings will be needed this financial year alone, the report estimates, as a record migrant intake is expected to grow the population by 715,000 in the next two years that will put further pressure on the market. 

More property investors needed to combat rental crisis, experts say

To address the rental crisis, Domain’s Chief of Research and Economics Dr Nicola Powell says there needs to be a “seismic shift in supply”. 

“In fact, our research shows that more than double the rental listings needed today to create a balanced rental market,” Dr Powell says. 

“There is no one-size-fits all solution to these challenges. Rising investor activity is needed, the build-to-rent sector advanced, additional rental assistance provided for low-income households, more social housing and assisting tenants transition to homeowners.”

Yet Domain also predicts property prices will keep rising for the next 13 months, leaving many Australians locked out of the housing market and locked in to renting.

Australian housing values have risen by an average of 1.1% in June, marking the fourth month in a row that values have increased across Australia’s capital cities, according to the latest CoreLogic’s national Home Value Index (HVI).

Every capital city, with the exception of Hobart, notched up gains. Sydney led the lift in values, rising by 1.7% in June, which amounts to a total growth of 6.7% since January.

“In dollar terms, Sydney’s median housing values are rising by roughly $4,262 a week,” CoreLogic director of research, Tim Lawless, said.

Brisbane was the second-strongest performer, with housing values lifting by 1.3%, while Adelaide and Perth rose by a more modest .9%. In Melbourne, values rose by .7%. Overall, since February, the HVI has gained 3.4%.

So why are capital city homes continuing to rise in value despite an aggressive streak of rate rises by the RBA?

According to Lawless, a lack of available supply continues to be the main factor.  “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.  Simultaneously, our June quarter estimate of capital city sales has increased to be 2.1% above the previous five-year average.”

Although, as Lawless noted, the pace of growth eased in June.

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

Regional Australia also recorded a fourth month of growth, with average housing values 1.2% higher in June.

The Australian property market will continue to shrug off inflationary pressures and the threat of recession to rise in value over the next 13 months, with Sydney house prices rising by 5% to 9% in value.

That’s the prediction of property listings site and research company, Domain, which argues that an influx of migrants between now and the end of June 2024 would act as an accelerant on property values, especially in Sydney, Hobart and Adelaide.

“Typically, overseas migrants rent on arrival, but, with a tight rental market Australia-wide, we may see some arrivals transition to home ownership sooner as they seek more stable housing alternatives,” the report noted.

“The rise of migrant numbers will also make rentals seem like a better investment option, and the shift to home buying from migrants will exert upward pressure on property prices, particularly in the current under-supplied market conditions.”

Domain forecast prices to rise in Hobart by 3% to 5%, while in Adelaide they will grow by 2% to 5%. Surprisingly, Melbourne, Australia’s second largest city, was tipped to grow by between zero and 2%:

Domain Housing Predictions

The “centre of positive price gains” will be concentrated in the combined capitals, with a slower pace of growth in units and combined regional house prices.

“House prices in Sydney, Adelaide, and Perth, and unit prices in Brisbane, Adelaide and Hobart, could have fully recovered from the 2022 downturn by the end of the next financial year,” the report states.

“Adelaide and Perth house prices are predicted to rise slowly and may avoid a downturn—but see a period of modest or sideways growth (for which Adelaide is renowned).”

The Australian property market has staged a comeback in the past few months, but it’s not all good news for home-owners, with some properties falling out of the million-dollar club in 2023.

Recent data from CoreLogic shows that while this time last year, 1,243 properties nationally had a median value at or above $1 million, as of May 2023, just 988 of the house and unit markets analysed nationally were in the million-dollar club.

That’s from a total of 4,436 house and unit markets that were analysed, with the percentage of million-dollar markets shrinking in the past year from 28% to just 22.3%. 

Sydney recorded the largest decline in suburbs falling below the $1 million mark, which CoreLogic Economist Kaytlin Ezzy said was “unsurprising”. 

“While declines across Sydney’s more expensive markets were some of the largest across the country, many of these markets had a relatively high starting point allowing them to retain the seven-figure price tags,” she said. 

“The trend among the suburbs where values have fallen below $1 million is in the more affordable locations on Sydney’s outer mortgage belt and fringe areas. Despite recording smaller declines it’s these suburbs where median values have dropped (below) the million-dollar threshold.”

Regional New South Wales was also home to many ex-million-dollar homes, as was Brisbane and regional Queensland. In the past 12 months alone, the Central Coast’s million-dollar markets halved from 33 to 17. 

Ezzy noted that it was these regions  that benefited greatly through Covid due to flexible working arrangements and lifestyle benefits–all of which made them an “attractive option for buyers”.

“However, the Covid surge in values also made these markets more sensitive to the rising cost of debt, with many recently minted million-dollar suburbs falling below the seven-figure mark,” Ezzy said. 

Whether these markets will return to the million-dollar club is highly dependent on the movement of the cash rate in coming months. Meanwhile, national property values have recovered slightly over the past three months—up 2.3% from its sharp decline of -9.1% between April 2022 and February 2023.

Rental vacancy levels remain tight across capitals, with residential vacancy rates for the month of May coming in at 1.2%, according to new data from SQM Research. A 3% rental vacancy rate is considered a healthy playing field for both landlords and renters alike.

The total number of rental vacancies rose slightly by 122 dwellings to stand at 36,907 residential properties, with Sydney rising marginally to 1.5%, while they held steady in Melbourne at 1.2%. Vacancy rates in Brisbane and Adelaide were also steady for the month of May at 1.0% and 0.6% respectively. In Perth, Canberra, and Hobart, rental vacancy rates lifted by 0.6%, 2.0% and 1.6% respectively.

It was a slightly different picture in CBDs, with rental vacancies rising by 5.1% in Sydney CBD, and 3.7% in Melbourne CBD and a much-tighter 2% in Brisbane’s CBD during May. Sydney and Melbourne’s relatively high vacancy rates in the CBD indicate pockets of opportunity for tenants looking for apartments.

According to SQM,  the national median weekly asking rent for a dwelling is $571.82 a week, with the median rent for a capital city house now at $767 a week. Unsurprisingly, the most expensive city to rent in is Sydney, with houses averaging $972.73 a week. Over the past 30 days, asking rents in the capital cities lifted by 0.6%, with the 12-month rise now 19.4% higher than a year ago.

Managing Director of SQM Research, Louis Christopher, noted that while there has been some easing in rental conditions “especially in regional Australia, it is still very much a landlord’s market for most capital cities”.

“Rental vacancy rates were largely steady for the month, notwithstanding another rise in Sydney and Hobart,” he said.

In a further sign the property market is bouncing back, the combined capitals lifted by an average of 1.2% in May, according to CoreLogic’s national Home Value Index (HVI).

The figure marks the third monthly rise in a row, combing on the back of rises of  0.6% and 0.5% in March and April respectively. It is also the strongest monthly growth since November 2021.

As CoreLogic noted, Sydney is leading the recovery trend, lifting by 1.8% in May—the city’s highest monthly gain since September 2021.  Since bottoming out at the beginning of the year, home values have risen by 4.8%, or a $48,390 lift in the median dwelling value.

Brisbane rose by 1.4%, Perth was up 1.3%, while Melbourne grew by a more modest .9%.

CoreLogic’s research director, Tim Lawless, said low levels of  housing supply coupled with rising demands as migration picks up was fuelling the recovery.

“Advertised listings trended lower through May with roughly 1,800 fewer capital city homes advertised for sale relative to the end of April,” he said.

“Inventory levels are 15.3% lower than they were at the same time last year and 24.4% below the previous five-year average for this time of year.”

With such a short supply of available housing stock, Lawless argued that “buyers are becoming more competitive and there’s an element of FOMO creeping into the market”.

“Amid increased competition, auction clearance rates have trended higher, holding at 70% or above over the past three weeks. For private treaty sales, homes are selling faster and with less vendor discounting.”

Regional housing values are also trending upwards, with the combined regionals index rising .5% in May, following a 0.2% and 0.1% rise in March and April respectively.

Renters are having to fork out a higher proportion of their incomes—more than 50% in some cases—to service rental leases owing to a lack of supply and surging demand for properties.

The newly released ANZ CoreLogic Housing Affordability Report: Reflections on the Pandemic and the Rental Market found rental affordability, which is defined as the portion of income required to service a new lease, is at the highest level since June 2014.

In real terms, this means 30.8% of a median income’s household income is required to service a new lease nationally. For low-income households, the situation is predictably worse: 51.6% of income is needed to service a rental for households at the 25th percentile income level.

Rental vacancy rates and price increases paint a bleak picture of Australia’s housing crisis. Since March 2020—when the pandemic sparked  a regional property boom—rent values increased more by an astounding 28.8% in the regions, while in capital cities they climbed by 24.4%. National rental vacancy rates as of April this year are at 1.1%, which is well below the 10-year average of 3%.

ANZ senior economist Felicity Emmett said a number of factors were contributing to Australia’s housing crisis.

“Heightened economic uncertainty has seen a decline in sales volumes in the private market and an increase in those seeking rental accommodation. Paired with a decline in social housing, rental demand pressures are being felt in all income brackets,” Emmett said.

CoreLogic Australia’s head of research, Eliza Owen, said a perfect storm of conditions, including the RBA’s rate rise spree and the return of overseas migration, was creating hardship for renters.

“As rents have risen sharply, the increase in the cash rate, and pressures in the construction sector have slowed the rate of dwelling completions,” Owen notes.

“This has meant investor conditions are not ideal, and has stemmed the flow of new rental properties to the market.”

In a further sign that the property slump is behind us, auction clearance rates increased by 13% this week, with some 75.3% of capital city property listings selling under the hammer, according to new data from CoreLogic.

There were 1,912 auctions across the combined capitals last week, compared with 1,692 homes auctioned the previous week. It marked the third week that the combined capitals notched up a clearance rate above 70%, and is the highest preliminary clearance rate since February 2022. Last week’s preliminary clearance rate was 74.4%. To put that into context:  61.3% of auctions held were successful this time last year.

As research anaylst at CoreLogic, Duane Kaak, noted: “There were 762 auctions held across Sydney this week, 17.2% higher than the 650 held last week, and 43.2% above the 532 auctioned this week last year.”

In Australia’s second-largest city, Melbourne, there were 834 auctions this week, which is 12.1% more than last week.

“With 696 auction results collected so far, Melbourne’s preliminary clearance rate held above 70% for the sixth consecutive week, at 74.4%,” Kaak said.

However, not all pockets of the property market are experiencing an up-tick in demand. CoreLogic’s quarterly Regional Market Update revealed that the regional areas that boomed during pandemic lockdowns are still experiencing a downturn.

As CoreLogic Australia Economist Kaytlin Ezzy noted, the NSW ‘lifestyle markets’ of the Richmond-Tweed,  the Southern Highlands and Shoalhaven and Illawarra regions recorded the largest annual declines in house values at  -24.2%, -16.0% and -13.7% respectively.

“These markets were among the largest beneficiaries of regional migration through the COVID-induced upswing and, as a result, became significantly more sensitive to the rising cost of debt and the normalisation in regional migration trends,” Ezzy said.

These declines, while steep, often pale in comparison to the price boom in the pandemic. For example, house values in Richmond-Tweed, on the NSW far north coast, rose by 51% during lockdowns.

The property market downturn appears to have bottomed out with CoreLogic’s national Home Value Index (HVI) revealing a lift in values across capital cities and regions for the second month in a row.

Prices rose by a combined average of .5% in April, according to the index, following a .6% rise in the previous month of March. In contrast, housing values fell -9.1% between May 2022 and February 2023.

Among the capital cities, Sydney led the rises, with values lifting 1.3% in April, Melbourne grew by .1%, Brisbane by .3% and Perth .6%, while Adelaide rose by .2%. Hobart and Canberra remained steady, while only Darwin went backwards, with values dropping 1.2% last month.

The news has prompted many property experts to wonder if the property slump is well and truly over. CoreLogic’s Research Director, Tim Lawless, says the lift in values is a direct response to a number of factors.

“Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift. Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average,” he said.

Lawless also noted that the rental crisis is prompting more first home buyers to rush to enter the market.

“A significant lift in net overseas migration has run headlong into a lack of housing supply. While overseas migration would normally have a more direct correlation with rental demand, with vacancy rates holding around 1% in most cities, it’s reasonable to assume more people are fast tracking a purchasing decision simply because they can’t find rental accommodation,” Lawless said.

There is no doubt that Australia’s property market has boomed over the past two decades, locking out a generation of homeowners and turning Sydney into one of the least affordable property markets in the world.

But according to Property Investment Professionals of Australia (PIPA) board member, former PIPA chair and University of Adelaide property academic, Peter Koulizos, the city that experienced that most capital growth over the past 20 years wasn’t the Emerald City (or even Melbourne) but—wait for it—Hobart.

Koulizos analysed the Australian Bureau of Statistics’ (ABS) median price of established house transfers from March 2002 to December 2022 and found that the Tasmanian capital recorded the biggest growth “by a country mile”.

“We always hear about the property markets of our two biggest capital cities because a large proportion of our national population live there, but when it comes to the performance over the long-term, they both are well down the leaderboard according to my analysis,” Koulizos said.

“Which just goes to show that smaller cities as well as major regional areas can be sound property investment locations.”

Hobart’s median house value was 5.9 times higher in December 2022 than it was in March 2002, rising from $123,300 to $727,000 over the period.

Coming in second was Adelaide, where the median house value increased from $166,000 to $680,000 over the past 20 years—or by 4.1 times—while Canberra came in third with a median house price some 4.08 times more than it was in 2002, growing from $245,000 to $999,000.

The remaining cities are in order of capital growth:

• Brisbane: 4.05 times (from $185,000 to $750,000)
• Melbourne: 3.49 times (from $241,000 to $842,000)
• Sydney: 3.48 times (from $365,000 to $1.27 million)
• Darwin: 3.16 times (from $190,000 to $600,000)
• Perth 3.05 times (from $190,000 to $580,000)

Australian house prices have recorded their first rise in 11 months, with CoreLogic’s national Home Value Index (HVI) revealing that capital city values rose by a combined .6% in March.

It followed a modest decline of .1% in February, and will surprise many commentators who argued that our capital city markets still had some way to fall. Sydney led the gains at 1.4%, followed by Melbourne at .6%, Perth at .5% and Brisbane by .1%. Elsewhere, values fell, with Hobart declining by .9%, while Darwin and Canberra fell by .4% and .5% respectively.

CoreLogic data shows that house values within the most expensive quarter of Sydney’s market were up 2% in March, while the upper quartile of the Sydney unit market was 1.4% higher over the month.

The combined regionals index also rose .2% over March, with the Fleurieu-Kangaroo Island SA3 sub-region rising the highest at 2.6%, followed by Dubbo in NSW at 2.5% and Wellington in Victoria at 2.4%.

According to CoreLogic director research, Tim Lawless, the rise in March housing values was due to a confluence of factors: tight rental supply, higher demand from immigration, and low stock levels.

“Advertised supply has been below average since September last year, with capital city listing numbers ending March almost 20% below the previous five-year average,” Lawless said.

“Purchasing activity has also fallen but not as much as available supply; capital city sales activity was estimated to be roughly 7% below the previous five-year average through the March quarter.

“With rental markets this tight, it’s likely we are seeing some spillover from renting into purchasing, although, with mortgage rates so high, not everyone who wants to buy will be able to qualify for a loan.  Similarly, with net overseas migration at record levels and rising, there is a chance more permanent or long-term migrants who can afford to, will skip the rental phase and fast track a home purchase simply because they can’t find rental accommodation.”

House prices may still be falling across the nation, but it’s not enough to help Australians wanting to become first-home buyers to enter the market.

Domain’s annual First Home Buyer Report revealed that in order for a couple on an average wage to buy an entry-level house, they would most likely have to enter mortgage stress territory: by having to put more than one-third of their combined income towards loan repayments.

Related: Five Steps To Beat Mortgage Stress

The report tries to shed a positive light on the housing market situation, stating that a “time machine” has been offered to first-home buyers across Australia.

“…falling property prices in certain cities, higher interest rates accrued on savings and wage growth have aligned to reduce the time to save for an entry-priced property deposit,” Nicola Powell, Domain’s chief of research and economics said.

But the numbers paint a different picture.

While it might be easier to save for a deposit due to falling house prices—six months quicker for an entry-priced house and two months quicker for an entry-priced unit—it’s the repayments that Australian home buyers could struggle to keep up with.

Looking at the mortgage repayments on an entry-priced home (house or unit) as a percentage of income for a couple aged 25-34, the report shows that the average repayment cost across the whole nation would be 37.4% for an entry-level house.

This includes a 50.9% average repayment on an entry-priced house in Sydney, 42.1% on an entry-priced house in Melbourne, and even a 45.3% repayment for couples looking to purchase in Canberra.

Source: Domain

“This is well over the 30% threshold and demonstrates how significant the impact of interest rate rises can be on mortgage serviceability,” the report acknowledges.

There are positive signs that Australian property prices have steadied in recent months, but experts are warning it’s too early to call the bottom of the market.

According to CoreLogic’s Daily Home Value Index (HVI), prices are up 0.3% across the five largest capitals through the month-to-date. Sydney prices are .5% higher for March so far, Melbourne and Perth are a slight .2% higher, and Brisbane values are flat.

However, according to CoreLogic CoreLogic research director, Tim Lawless, the housing market is still facing “some considerable downside risk”.

“With this in mind, it’s still too early to call a bottom of the cycle,” Lawless said.

“Interest rates may rise further from here, as well as the fact that we are yet to see the full impact on households from the aggressive rate hiking cycle to date.

“Additionally, economic conditions are set to weaken through the middle of the year, as household savings buffers are being depleted and labour markets are likely to loosen further.”

Lawless noted that rate of new market listings may help fill in the picture of Australia’s property market in 2023.

“Any sign of a larger-than-normal level of freshly advertised stock could signal that prospective vendors aren’t willing or able to wait out the downturn any longer,” he noted.

“Given the uncertainty ahead of us, the next few months will be critical to understand whether the housing market is indeed moving through an inflection point or if it is simply the eye of the storm.”

Related: Is the Australian Property Market Going to Crash?

In a sign that the Australian property market remains as tough as ever for new entrants, the number of new owner-occupier first home buyer loans fell 8.1% in January 2023, according to new ABS data.

The figure marks the its lowest level of activity since February 2017, and comes despite Australia’s property market cooling over much of 2022 and a swag of government grants designed to help first home buyers enter the market, including the First Home Loan Deposit Scheme and the First Home Super Saver Scheme.

According to the ABS, the value of new owner-occupier loans fell 4.9% $14.7 billion in January 2023, while new investor loans dropped 6% to $7.4 billion. Combined, new loan commitments for housing fell to a total of $22.1 billion or by 5.3%

“Owner-occupier first home buyer lending continued to decline from the high reached in January 2021,” noted ABS head of finance and wealth statistics, Mish Tan.

“The decline coincided with the winding down of COVID-19 pandemic stimulus measures.”

Tan also cited “anecdotal feedback” from lenders that reduced borrowing capacity due to rising interest rates had impacted overall demand for new housing loans in recent months.

Australian property prices received a respite from sharp drops this month due to low advertised stock levels and a rise in auction clearance rates.

According to the latest CoreLogic Home Value Index (HVI), the national decline was only -0.14% in the past month–the smallest monthly fall since May last year.

May 2022 was when the RBA first began its rate rising cycle, with the property market seeing a -0.13% decline of the HVI that month. To put that into perspective, for the month of September in 2022 (following many consecutive rate hikes), the HVI had declined by -1.6%.

Now, for the month of February 2023, the “most significant driver of the national deceleration” in price falls, according to CoreLogic’s report, was a 0.3% rise in Sydney dwelling values.

Excluding Hobart (-1.4%) and Darwin (-0.3%), every other capital city saw housing values fall by less than -0.5% over the past month.

The stabilisation of housing values, CoreLogic research director Tim Lawless explained, coincides with “consistently low advertised supply levels and a rise in auction clearance rates”.

“This trend towards a below average flow of new listings has been evident since September last year, coinciding with a loss of momentum in the rate of value decline,” Lawless said.

Whether this trend will continue is uncertain, with CoreLogic acknowledging that housing demand and the Australian property market could be further dented if the rate hiking cycle continues.

“Considering the RBA’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labour markets, there is a good chance this reprieve in the housing downturn could be short-lived,” Lawless said.

“We also have the fixed-rate cliff ahead of us; arguably the full impact of the aggressive rate hiking cycle is yet to play out.”

Covid-19 may have breathed new life into Australia’s regional property market, but just one day on from Valentine’s Day and a new report says it’s a “love affair” that’s swiftly coming to an end.

In October 2022, CoreLogic’s Regional Market Update–which examines Australia’s 25 largest non-capital city regions–showed that 21 of those regions had recorded an increase in house values over the year.

Now, a mere few months later, the same report shows only 13 areas have recorded an increase in the year to January 2023, with CoreLogic stating that “Australia’s COVID-induced whirlwind love affair with the country’s hottest regional cities has run its course”.

Of the 25 regions analysed, the region which recorded the weakest performance across all metrics (being annual growth, drop in sales volumes, longest days on the market, and highest vendor discounts), was Richmond-Tweed, a coastal and hinterland region in northern New South Wales.

Richmond-Tweed’s yearly growth rate was -18.6%; its drop in the volume of sales was -36.1%. It had a longest time on the market record of 71 days; and the highest vendor discounts of -8.3%.

CoreLogic’s head of research Eliza Owen said in the report that it’s unsurprising Richmond-Tweed was the region to report the weakest performance across key metrics.

“This was the region where values skyrocketed, with houses increasing more than 50% during COVID, taking the median house value to more than $1.1 million,” Owen said.

“Since then much has changed with borders reopening, outbound travel returning, workers returning to the office not to mention the overlay of nine rate rises.”

And with the RBA’s warning that further rate hikes are on the agenda to curb inflation, Owen said it’s expected that housing values will continue to trend lower in the coming months–with regional areas not immune to the softer conditions.

However, regional market performance overall remained more resilient than capital city dwelling markets.

Since the incessant rate hiking began last May, monthly value changes have averaged -0.8% across regional Australia in the year through to January, compared to -1.1% in the capitals.

Regardless, the downwards trend is expected to continue across the board until interest rates stabilise.

Related: Is The Australian Property Market Going To Crash?

Brisbane became one of the standout property markets during the COVID-19 property boom, as many locked-down homeowners south of the border sold up and bought bigger homes up north—often for a fraction of the price they would have paid in Sydney or Melbourne.

The result? Brisbane’s housing market boomed by 43% between key lock-down periods (at least for Melburnians) of August 2020 and June 2022, according to CoreLogic’s Daily Home Value Index (HVI).

“It was the fastest trajectory of rising values on record,'” CoreLogic’s head of research, Eliza Owen said.

But what goes up, sometimes must come down—and as the HVI reveals—Brisbane’s home values declined 10.9% between the peak in June of last year and January 28, as the RBA started lifting rates. Usually declines happen over a number of years, but this 10.9% decline took a little more than seven months, making this both the “largest and quickest decline” in the Brisbane HVI so far.

“Brisbane now stands out as one of two capital city markets with record declines, the other being
Hobart,” Owen said.

“Sydney continues to have the largest peak-to-trough falls of the capital city markets
—currently at -13.8%—while peak-to-tough falls remain mild in some cities, such as Perth, where
values are down just -1.0% from a recent peak in August 2022,” she said.

Despite Brisbane values coming off strongly in the last six months, Owen notes that the median dwelling price in Brisbane is still up on pre-pandemic values: from $506,553 at the onset of COVID-19 in March 2020, to $707,658 at the end of 2022. This leaves home values across Brisbane 27.9% higher than at the previous low in August 2020.

“Despite the large decline from peak, Brisbane maintains the third highest gain in value of the capital cities since the start of the pandemic,” Owen said.

However, it has some way to go before it can rival Sydney for home values: there is a $435,170 difference in median house values between the two cities.

Related: Australian Property Forecast: What’s In Store for 2024?

The usually overheated Sydney property market bore the brunt of last year’s property value declines, with Domain research showing that housing values dropped by 10.9% in the harbour city and 5.9% in Melbourne.

Canberra and Brisbane house values fell by -6% and -1.1% respectively last year. Adelaide, meanwhile, was up by 10.2%—no doubt due to its lower house prices—and Perth home values increased by 5.7% for the year. Combined capital city house prices were down -5.% in 2022.

However, the December quarter was relatively mild compared to the September figures. Most notably, house prices in Sydney, Brisbane and Canberra saw an easing pace of quarterly decline in December, while Melbourne, Adelaide and Hobart stabilised with some minor growth, according to Domain chief of research and economics, Dr Nicola Powell.

Powell said: “The spring selling season bore the brunt of interest rate shocks and sky-high inflation levels. This is why the September quarter saw house prices fall at their fastest quarterly rate.”

Melbourne values grew by a subtle .7% in the December quarter, while Sydney slowed its pace of decline to -2.1%.

Powell said a tight supply of homes on the market was “helping to keep prices stable”, as sellers held off listing their homes until the full the housing market downturn and rate rises settled.

“Now in the December quarter, the data suggests that the peak rate of the quarterly decline has passed as buyers have had time to adjust to the new norm of rising debt cost and reduced borrowing capacity,” Powell said.

Based on calculations from Domain Home Loans, those with a $1 million mortgage are now paying almost $1800 more on their loan than this time last year due to the RBA hiking rates eight times in 2022.

Related: Australian Property Market Forecast: What’s In Store for 2024?

Australian house prices are falling at record-breaking levels, posting a decline of -8.4% between May of last year and January 2023, according to fresh CoreLogic data.

The downturn surpasses the previous record when home values fell -8.38% between October 2017 and June 2019. As CoreLogic noted in a statement: “While the housing downturn between 2017 and 2019 lasted 20 months, the new record-breaking price falls have played out in less than nine months, with further falls expected in the months ahead.”

As CoreLogic’s head of research, Eliza Owen, said, the falls are due, in no small part, to the RBA’s bullish rate hiking spree.

“A 300-basis point increase in the underlying cash rate over just eight months has resulted in a rapid reduction in borrowing capacity, lowering the amount buyers can offer for homes,” Owen said in a statement.

“In addition to constrained borrowing capacity, higher interest costs may be dissuading potential buyers altogether.”

Owen also cited Australians historic levels of debt, with the latest Reserve Bank of Australia’s estimate of housing debt-to-income sitting at an eye-watering 188.5%. This is compounded by the fact that many Australians’ wages are going backwards in real terms.

Owen said: “A decade ago this figure was 162.0% and in 2002 the ratio was 130.2%. Higher household indebtedness may have increased the sensitivity of housing values to interest rate rises.”

The highest falls were predictably seen in Australia’s three largest cities, with Sydney falling -13%, Melbourne falling -8.6% and Brisbane coming off -10%. An average, Australia homes dropped an estimated $64,820 in value since May last year.

CoreLogic analyses detached houses, units and a combined dwellings index—that includes both houses and units—to determine its Daily Home Values Index.

Economists are expecting to see more price falls for national home prices in 2023 with hopes that positive demand effects will ease the downward trend.

According to the latest PropTrack Home Price Index, national home prices have now seen nine straight months of price declines, falling 4.25% below the peak from March 2022.

With the cash rate sitting at 3.10% after the RBA’s incessant rate rises, maximum borrowing capacities have already dropped by close to 30%, PropTrack senior economist Eleanor Creagh tells Forbes Advisor.

“The significant reduction in borrowing capacities implies further price falls,” Creagh explains.

“It will take time for higher interest rates to fully affect prices, so they are likely to continue to fall as interest rates continue to rise.”

And interest rates are expected to keep rising, with “at least one” more hike predicted in the foreseeable future, then “borrowing costs will continue to increase and maximum borrowing capacities will further reduce, shrinking buyers’ budgets and pushing home prices lower”.

Yet the downward pressure from rate rises can be countered to a degree, Creagh says, “by positive demand effects that stem from tight rental markets and rental price pressures, rebounding foreign migration, stronger wages growth, and over the long term, housing supply pressures”.

“In addition, if interest rates peak in 2023 as expected, price falls are likely to ease, with values stabilising as uncertainty reduces.”

CoreLogic has released its annual Best of The Best Report, summarising the Australian Property Market’s key trends across the past 12 months as well as forecasting what the year ahead may look like.

Unsurprisingly, the outlook for 2023 isn’t all that positive. As CoreLogic explains, Australia’s property trends over the foreseeable future will largely be shaped by the RBA’s monetary policy movements.

Since the most recent rate rise statement outlined the expectation of further increases in the months ahead, it’s expected the same trend will continue to “put further downward pressure on property prices”, the CoreLogic report reads.

That is at least until the cash rate reaches it’s peak, which economists are forecasting will occur by mid-2023.

But the RBA isn’t the only influencing factor on the housing market.

“Aside from monetary policy, migration and rental trends could also see a lift in investor and first home buyer activity as housing values find a floor,” the Best of The Best Report explains.

However, the report also forecasts that while there was diminishing investor increase in 2022, this could increase in 2023—especially since “prospective investors could be positioned to take advantage of both high rental income and capital gains“.

Ultimately, CoreLogic predicts the 2023 housing market performance outlook to “continue to be a mix of headwinds and tailwinds”, with Australians facing yet another year of uncertainty.

National residential property listings have risen across the month of November, as have national asking prices for combined dwellings. It’s data like this that is leaving some property experts feeling more positive about 2023.

The latest data from property research company, SQM Research, shows that new property listings increased by 2.4% in November when compared to October, reaching a total of 241,701 across the country.

Additionally, over the month to December 5, national asking prices rose by 1.3% for combined dwellings as property owners look to keep up with rising inflation. There’s been an 8.5% increase in the last 12 months. Capital city asking prices for combined dwellings, however, fell by 0.1% in the month to December 5, despite increasing overall by 0.5% in the last 12 months.

SQM Research managing director Louis Christopher says today’s numbers have confirmed his relatively positive outlook on housing for 2023.

“Listings are only 3.4% higher than 12 months ago, which is a small increase given the housing downturn,” he explains.

“This is somewhat masked by the fact we had a massive surge in property for sale on the end of lockdowns and other travel restrictions in 2021. However the marginal rise in old listings confirms this downturn is not severe.”

Christopher adds: “There is nothing in (these) numbers which change my mind on that”.

The largest monthly increases in property listings were in Hobart (9%), Adelaide (5.7%), Canberra (3.9%) and Melbourne (2.7%).

Additionally, over the past 12 months, Hobart has increased its property listings by 75.3%. Comparatively, Melbourne’s property listings have fallen -6.5% in the same period.

CoreLogic data also revealed that the combined capital cities saw 2506 homes taken to auction last week: the busiest week since mid-June.

However, as CoreLogics’ Head of Research, Eliza Owen, notes, it comes on the back of a lacklustre spring selling season.

“Spring came and went without the usual surge in listings,” Owen says.

“Instead of new listing campaigns rising from winter to spring, freshly listed properties fell nationally for the first time in at least 12 years.”

The number of Australian suburbs with a million-dollar median property value has shrunk significantly in the past six months, with the unsurprising culprit being the combination of rising inflation and the RBA’s consecutive–and ongoing–rate hikes.

CoreLogic analysed 3649 suburbs in both capital cities and regional dwellings, comparing the data to a data set taken six months ago in April 2022 when the RBA first raised rates.

The analysis showed that the median value of 169 suburbs across the nation have dropped below the million-dollar mark, while only seven suburbs have increased in value to seven figures and above.

The most significant drop in million-dollar suburbs was seen in Greater Sydney, where 64 suburbs fell below seven figures. This was then followed by the rest of New South Wales, which saw a fall in value to under one million dollars for 30 suburbs.

Greater Melbourne and Greater Brisbane were next in line with the greatest change since April 2022, showing a decline under a million-dollar median in 28 and 23 suburbs respectively.

Despite the recent Brisbane drop, CoreLogic Research Director Tim Lawless says Greater Sydney and Greater Melbourne are the only capitals that have seen a reduction in the number of million-dollar suburbs in comparison to October last year.

In contrast, of the seven suburbs which rose above the million-dollar median mark in the past six months, there were two in both Greater Perth and Greater Adelaide, while two others were in NSW and one in Victoria.

Across the nation, there are still 836 suburbs remaining with a consistent median property value over $1 million in comparison to the previous data set. 347 of such are in Sydney, with 117 in Melbourne.

Despite the decline in value, CoreLogic says Australia has more than double its number of suburbs with median values of $1 million or more when compared with the onset of COVID-19 in March 2020. At that time, there were only 393 million-dollar suburbs.

Yet the current post-pandemic weakness is forecast to continue, thanks to an expected seventh consecutive rate rise anticipated in December making it “more than likely the million-dollar club will continue to shrink”, according to Lawless.

They were the towns that boomed during the pandemic lockdowns: lifestyle destinations where the prices of housing was pushed up as refugees from Melbourne and other parts of Australia inundated the idyls.

Now, according to CoreLogic data, the tide has started to turn, with many of the regional centres that experienced the fastest growth now among the fastest declining markets over the three months to October.

CoreLogic’s Regional Market Update analysed Australia’s 25 largest non-capital city regions, showing house values in six of the most popular lifestyle markets recorded falls of 6% or more last quarter. This included Richmond-Tweed (-11.7%), Southern Highlands and Shoalhaven (-7.1%), Sunshine Coast (-7.1%), Gold Coast (-6.4%), Illawarra (-6.1%) and Newcastle and Lake Macquarie (-6.0%).

Regional NSW fared poorly on a range of benchmarks, with Southern Highlands and Shoalhaven notching up the largest decline in sales volumes (-27.5%) and the highest vendor discounting rate (-4.9%).

CoreLogic Economist Kaytlin Ezzy said more than 87% of the regional house and unit markets analysed recorded a quarterly decline in values.

“Consecutive interest rate rises, persistently high inflation, and waning consumer sentiment saw the pace of value declines accelerate across regional Australian property markets,” Ezzy said.

It is unsurprising the flood-ravaged Richmond-Tweed region recorded the strongest decline in house values, Ezzy noted.

“Throughout the COVID period, values skyrocketed, rising more than 50% and taking the median house value to more than $1.1 million. However the impact of this year’s floods, coupled with seven consecutive rate rises, has seen house values fall in the region by nearly -16% since April.”

Properties in regional towns, as well as capital cities, have recorded a drop in property prices for the month of October, as interest rate rises flow through to Australia’s highly leveraged property market.

According to the most recent CoreLogic figures, the national Home Value Index (HVI) has posted six months of declines, with values falling a further -1.2% in October.

Across the capital cities the month-on-month decline ranged from a -2.0% fall in Brisbane to a -0.2% drop in Perth. Melbourne fell -.8%, Sydney dropped by -1.3%, while Hobart fell -1.1%. Across the regions, monthly falls of more than -1% were recorded in regional NSW (-1.7%), regional Victoria (-1.4%) and regional Queensland (-1.3%). Meanwhile, regional South Australia was largely resilient.

Source: CoreLogic Property Values for October

During the Covid-19 pandemic and lockdowns, many regional towns notched up double-digit price growth as employees swapped commuting-into-the-city for working-from-anywhere. The drop in regional values reflects the softening of this boom, however, prices in the regions remain above pre-Covid levels.

The good news is that the rate of decline is decreasing across Australia’s cities: easing from -1.6% drop in August, -1.4% in September and now -1.2% in October.

However, CoreLogic’s Research Director, Tim Lawless, said this trend could reverse.

“Despite the easing in the pace of decline, with Australian borrowers facing the double whammy of further interest rate hikes along with persistently high and rising inflation, there is a genuine risk we could see the rate of decline re-accelerate as interest rates rise further and household balance sheets become more thinly stretched,” he says.

“To-date, the housing downturn has remained orderly, at least in the context of the significant upswing in values. This is supported by a below-average flow of new listings that is keeping overall inventory levels contained. There’s also tight labour market conditions, an accrual of borrower savings and a larger than normal cohort of fixed-interest rate borrowers, who have so far been insulated from the rapid rise in interest rates.”

Once the full rate hike is passed on to mortgage rates, the average variable mortgage rate for a new owner occupier loan will reach approximately 4.96%, up from the April low of 2.41%, according to CoreLogic. Based on a $750,000 loan amount and repayments on a 30-year loan term, the rate hiking cycle to date has added roughly $1079 to monthly mortgage repayments.

While more homeowners are likely to feel the impact of mortgage stress, we are unlkely to see forced sales of homes as unemployment remains historically low, Lawless notes.

“Although interest rates are rising at the fastest pace since the early 1990s, we aren’t seeing any signs of panicked selling or forced sales appearing in our monitoring of listings data,” he says.

CoreLogic’s head of Australian research, Eliza Owen, told ABC news it was “too early” to declare the worst of the home price falls as over.

Related: Bad News on the Budget? Australians will Feel the Pinch for Some Time

The effect of interest rates are starting to be felt across Sydney’s highly leveraged property market with home values down -10.1% in eight months, CoreLogic’s daily home value index shows.

The double-digit drop equates to roughly $116,500 lost in Sydney property values since the city hit its most recent peak value in February of this year. The RBA has hiked the cash rate by 2.5% over the past six months: from .1% at the beginning of the year to 2.6% as of October, prompting concerns in some quarters that it may go too far.

CoreLogic notes that Sydney’s decline comes after a growth of 27.9% or roughly $252,900 in the city’s property values from the “COVID-trough to peak”.

Sydney values are now down –9.5% since May 3 and -10.1% since peaking on 13 February this year.

It is unsurprising that Sydney should feel the heat owing to its status as Australia’s most expensive capital city housing market, which makes it more vulnerable to interest rate rises.

“Although Sydney’s housing values were already in decline when the rate hiking cycle began, the pace of decline accelerated sharply following the first interest rate increase in May,” CoreLogic research director Tim Lawless said.

“Despite the -10.1% decline so far, Sydney home values still have a way to go before wiping out the capital gains accrued over the recent growth cycle. Home values would need to fall a further -11.4% to get back to the levels seen at the onset of COVID.”

The CoreLogic figures show Melbourne’s values are second to Sydney, falling -6.4% since January 14 while Brisbane is down -6.1 % since its June peak. Meanwhile, Hobart and Canberra are down -4.7% and -4.4% respectively since their month-end peaks, and Adelaide and Perth have both declined less than -1% since their highs.

Darwin is the only capital city where housing values haven’t started to fall, although CoreLogic notes that dwelling values remain -10.1% below the record highs of 2014.

However, there was some good news for Sydney property owners, according to Lawless: “The rate of decline has continued to moderate through October, improving from a -2.2% decline over the four-week period ending 3 September to -1.3% over the most recent four-week period ending 23 October.”

Meanwhile, a report in The Age and SMH, revealed that internal research by the RBA has found that property prices could fall as much as 20%.

Related: Guide to Buying an Investment Property in Australia

The property market continues to decline, with four in five houses and units in our capital city suburbs recording a fall in values over the past quarter, according to CoreLogic research.

Out of the 3027 house and unit markets analysed, 79.5% (being 2405 markets) experienced a fall in value–an increase from the 1293 markets recording a decline in Q2.

With the data showing a steep decline, it’s evident that the property industry is feeling the effects of the RBA’s successive cash rate hikes. Rates have risen by 2.5% this year so far.

“This analysis shows the effect of the three 50 basis point rate hikes through the September quarter, plus the lagged impact of the first two hikes (totalling 75 basis points) in May and June, so it’s not surprising to see significantly more markets recording a decline in value,” CoreLogic economist Kaitlin Ezzy explained.

State-by-state house and unit values

In Sydney, all 563 suburbs analysed saw house values fall over Q3. For units, only 13 of the 304 markets analsyed recorded a rise in value.

Melbourne saw a similar trend, with all 285 house markets recording a quarterly decline, while 88.4% of the 251 unit markets also recorded a fall in values.

Up north in Brisbane, property value growth conditions fell into negative territory. Only 5.7% of suburbs analysed saw a rise in value in Q3, while 46.7% of the 169 unit markets analysed recorded a quarterly decline–up from the 5.6% which recorded a decline in June.

Meanwhile, Adelaide has seen 48% of the 302 house markets fall in value over the quarter along with 11.6% of the 95 unit markets. Adelaide’s unit market still remains the strongest out of the capitals, with quarterly growth in unit values at 2.4%.

More than half (53.1%) of the 288 house markets analysed in Perth recorded a decline over the quarter, while units values declined in 37 of the 95 unit markets analysed.

Hobart is the only Australian capital city to record a decline in all house and unit markets analysed over the quarter, showing a -4.3% decline in house values and a -5.3% decline in unit values, while Darwin was the only capital city to see both house and unit values increase over the quarter at a 1.4% increase each.

Lastly, Canberra saw all of its 85 housing markets record a decline over Q3, with 40 of its 47 unit markets also reporting a decline.

Australian property prices have fallen by 1.4% in September, as the market continues to cool in response to rising interest rates and higher living costs.

According to data released by CoreLogic, the decline was a slight improvement on August price falls of 1.6% in August.

“The loss of momentum in the pace of value decline was evident across most of the capital cities and broad rest-of-state regions, with a few exceptions,” noted CoreLogic’s research director, Tim Lawless.

On the east coast of Australia, Sydney property values fell by 1.8% in September, Melbourne declined by 1.1% and Brisbane was down 1.7%. Hobart fell by 1.4%.

Meanwhile, Adelaide and Perth recorded softer declines of 0.2% and 0.4% respectively in September.

As Mr Lawless noted, Darwin is the only capital city where housing values haven’t trended lower. He said it was too soon to say whether the decline had bottomed out.

“It’s possible we have seen the initial shock of a rapid rise in interest rates pass through the market and most borrowers and prospective home buyers have now ‘priced in’ further rate hikes,” he said.

“However, if interest rates continue to rise as rapidly as they have since May, we could see the rate of decline in housing values accelerate once again.”

Houses lost more value than apartments, declining by 1.5% in September compared to 0.7% for units.

Renters continue to feel the brunt of the movements within the housing market, with capital city rents up 16.5% since the pandemic began in early 2020. Regional rents are up by roughly one quarter.

The most important fact in the economy at the moment is not record low unemployment or even record high inflation of 6.1%.

It is housing prices, which, as the below chart shows, are suddenly falling. The RBA’s aggressive interest rate rises have made mortgages much more expensive and people are reacting by retreating from the housing market, especially the Sydney housing market.

The Sydney property market was the first to tumble. It was also the first place to record house price falls in 2017-18, the last time the Australian property market went into a correction. Melbourne is hot on Sydney’s heels. In both cities the house price falls are the biggest in the expensive segment of the market, which is the exact pattern we saw last time: falls began in the priciest parts of the market and then spread.

As CoreLogic research director Tim Lawless said in May this year: “Historically more expensive housing markets tend to lead the upswing, but also lead the downturn.  If we get the same pattern as last time, falling housing prices will spread from expensive suburbs in Melbourne and Sydney across the country.”

Australian property prices matter

It would be easy to get the wrong impression about property prices. They can be framed by some commentators as important only insofar as they are socially divisive, providing fodder for population debates or the generation wars, pitting baby boomers against millennials, who complain they are priced out of the market.

But there’s more to house prices than the headlines let on. They are a giant moving part in our economy, and the first to be hit by any changes in interest rates. As a result, the RBA must watch property prices intently because of the way it extends influence over other moving parts of the economy.

Recently, new housing loans have skyrocketed in size, meaning new borrowers are especially sensitive to rising interest rates. As the next chart shows, loan sizes have changed dramatically in the last two years as interest rates plunged. The average owner-occupier home loan starts at more than half a million dollars in Australia now, thanks mostly to Sydney’s incredible property market:

It is these new borrowers that have the most left to pay off, and will suffer the most from rising interest rates. What’s more, new borrowers who had a minimal deposit have the highest chance of ending up under water when house prices fall, i.e. owing the bank more than the house is worth. Even if you had a 20% deposit, if the market value of your new home falls by over 20%, you’re under water. And some purchasers start with even smaller deposits.

Australians are inclined to keep paying off their home loans when they owe more than the house is worth, RBA research has found. We don’t tend to default, unlike US borrowers when they get into trouble. This means the banks are fairly safe even if house prices fall. With one exception: If there’s also a big economic calamity that sends a lot of people out of work, that can change Australian borrowers’ tendency to keep paying down the mortgage.

The combination of being under water and losing your job is enough to trigger defaults. This is the other key reason house prices matter so much.

Falling house prices can trip up the whole economy

The domestic economy is made up of 24% investment (buying machines, putting up new warehouses, laying new roads) and 76% consumption (paying dentists and lawyers, paying for cleaning and deliveries, plus consumables like fuel, food, etc) . House prices are an important driver of both, but they drive consumption first and fastest.

There are two main ways this works

1. Consumption effect. Property trading causes consumption. When you sell a property you might pay a painter and a landscaper to spruce things up. When you buy a property, you pay real estate agents, mortgage brokers, conveyancers and moving companies. Then you will often get some tradies in to fix a few little aspects of your new place. And finally you will often get some new furniture. When a lot of houses trade hands it makes the cash registers ring at Harvey Norman.

When property prices are rising, people trade more properties: sellers are keen to come to the market, places stay on the market for a short period, and people want to buy before prices go up more. The reverse is true when house prices are falling. So rising house prices cause consumption in a very direct way.

However, while the consumption impact is strong, it only applies to the small share of people who buy or sell a house each year. There’s another, even bigger effect, called the wealth effect, that applies more broadly.

2. Wealth effect. When people’s homes go up in value, they feel richer, and so spend more. The effect is larger the more wealth people have, and so the wealth effect applies most strongly to older households. They’ve been in luck recently, but that luck is now turning.

The RBA is, as I mentioned earlier, terrified of how falling house prices can crash an economy. A big downturn in house prices causes a big wealth effect that squeezes consumption. That in turn can make unemployment rise, which, of course, makes it even harder for people to pay back their home loans.

Interest Rate Rises: How Much is Too Much?

The interest rate hikes the RBA is unleashing at the moment need to be very carefully calibrated. The perfect amount of rate hikes will cause inflation to retreat and house prices to merely modulate.  But too much could cause house prices to spiral downward and take the economy with it in a descent that is hard to reverse. Especially when the Federal Government has a lot of debt and is less likely to come to the rescue with spending.

Interest rate hikes take a long time to have their full effect on the economy, so this year’s cuts will still be dampening things in 2023. Will the RBA go too far and inadvertently crush the Australian property market and the economy with it? Time will tell.