House prices continue to rise, but there are further signs that a recent rebound may be losing steam as spring selling season approaches.
Key points:
- Home values rose 0.7 per cent in July, a deceleration from the months prior
- Capital city markets recorded stronger growth than regional areas
- The number of homes being listed for sale has started to increase after being very weak
The latest CoreLogic Home Value Index for Australia rose 0.7 per cent in July, the fifth straight month of gains.
However, the rise last month is a further deceleration from the 1.2 per cent increase seen in May and 1.1 per cent rise in June.
Rival data firm PropTrack, owned by real estate advertiser REA Group, recorded a much more modest 0.2 per cent rise in prices.
CoreLogic’s research director Tim Lawless said, after leading the upswing, the monthly pace of growth in Sydney had halved from a recent high of 1.8 per cent in May to 0.9 per cent in July.
“Sydney has also seen a significant rise in the number of fresh listings added to the market, 9.9 per cent higher than the same time last year and 18.0 per cent above the previous five year average,” he noted in the report.
“An increased flow of new listings provides more choice and may be working to reduce some of the urgency felt among prospective buyers.”
The same trend is not being seen across all cities, with the monthly rate of price increases accelerating in Brisbane and Adelaide (both 1.4 per cent), where new listings remain below the five-year average.
Perth’s market remained strong (+1 per cent), joining Adelaide and regional South Australia as the only markets currently at record high prices.
The other capitals and rest-of-state markets remain below their COVID boom peaks, with most having recovered less than half of last year’s falls.
Having generally boomed most during COVID, as more people sought sea and tree changes, regional markets have mostly missed out on the recent rebound, rising an average of just 0.2 per cent last month, 1.2 per cent over the past three months and still down 5.6 per cent over the past year.
CoreLogic reported that the Gold Coast (+4 per cent), south-east Tasmania (+3.1 per cent) and Newcastle/Lake Macquarie (+3 per cent) had the largest regional price increases over the past quarter.
On the flip side, regional Victoria dominated the losses, with Bendigo (-3.7 per cent), Shepparton (-2.3 per cent) and Warrnambool/south-west region (-2.3 per cent) all dipping sharply.
PropTrack reported the strongest monthly price gains in Adelaide, Brisbane and Perth, with its data showing all three cities at record highs, with Hobart (-6.6 per cent), Canberra (-5.9 per cent) and Melbourne (-4.9 per cent) furthest away from the previous peak.
Slowdown in premium markets may foreshadow wider weakness
The slowdown in the overall growth rate of property prices has been driven by the top end of the market, which has fallen from leading the broader gains to posting the slowest increase (0.7 per cent) in July.
Meanwhile, the cheapest quarter of the market posted the strongest rise (+1 per cent) last month, with the middle of the market up 0.9 per cent.
“Premium housing markets tend to lead the cycles, so the slowdown in the pace of growth could be a sign of a broader easing in the pace of growth over the coming months,” Mr Lawless said.
He said another early sign of weakness was an unseasonal rise in new for sale listings, which were up 3.9 per cent over July, especially in Sydney, where there are almost 10 per cent more properties coming onto the market than at the same time last year.
“The flow of new listings has held at below average levels since September last year,” Mr Lawless observed.
“With total stock levels still low and selling conditions reasonably strong, it may be the case that more home owners are picking current market conditions as a good time to sell, rather than waiting until spring when stock levels might be higher, creating more competition among vendors.
“Another possibility is that we are seeing the first signs of motivated selling as the rapid rate hiking cycle catches up with household balance sheets.”
However, there is still an historically low level of properties currently for sale, 23.3 per cent below average levels over the past five years.
Mr Lawless says sales are currently just above the five-year average, indicating there is demand in the market, however a further increase in demand might be needed to see home prices continue to rise.
“If we do see the volume of listings increase further, which is likely as we approach spring, that could take some further heat out of the market unless that is offset by a more substantial lift in active buyers,” he added.
PropTrack senior economist Eleanor Creagh agrees this could be a headwind for further strong property price growth.
“Auction activity has increased, and clearance rates remain firm as home prices lift — this is likely to buoy seller confidence,” she noted.
“If the flow of new listings picks up as we head into spring, the pace at which prices have grown this year may slow.”
Rents still rising, but not as fast
The news for those currently outside home ownership was mixed — rents continued to rise in July for the 35th consecutive month, but the 0.6 per cent increase was the smallest since December 2021.
Regional markets have seen the biggest slowdown in rental growth, as pandemic trends towards country living have partially unwound, with rents up just 0.2 per cent last month — the smallest increase in three years.
The decrease in rent increases has coincided with a rise in vacancy rates from a low of 1.3 per cent early last year to 1.6 per cent last month, although this is still just half the decade average for regional areas.
Capital city rent growth of 0.8 per cent in July was the smallest increase since December last year, with Canberra and Hobart seeing falling rents over the past three months.
The vacancy rate across the capital cities remains at 1.2 per cent, well below the decade average of 2.8 per cent, reflecting a shortage of available housing in most capitals.