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Australian home values have pushed to another all-time high in January, maintaining the trends established in the latter stages of 2023.
The latest CoreLogic report detailed another new national price record for the month, with three key cities still leading the way while others continue to soften.
Will the diversity between markets carry on as 2024 unfolds?
January witnessed a +0.4 per cent rise in Australia's median property price, bringing annual gains to an impressive +8.7 per cent.
However, a clear two-speed market dynamic has emerged.
Sydney and Melbourne once again remained close to flat after losing momentum towards the end of 2023.
By contrast, Brisbane, Adelaide, and Perth experienced growth of at least +1 per cent, once again setting new all-time highs for each of these three capitals. Perth's annual gains have now reached a staggering +16.7 per cent.
Darwin and Hobart have continued to show volatility in recent months, fluctuating between growth and declines, while Canberra maintained a relatively flat path.
Regional markets generally mirrored their capital city counterparts, with regional WA emerging as the top performer once again.
Several themes have taken root across the market, signalling trends that are likely to continue in the near future.
The rebound in 2023 witnessed a widespread uplift in property values around the country. Despite affordability pressures, the shortage of available stock is propelling house prices up faster than units.
According to CoreLogic's research director Tim Lawless, "Since the commencement of the upswing, capital city house values have surged +11.0 per cent higher, while unit values are up +6.9 per cent."
"It seems that most Australians are willing to pay a higher premium than ever for a detached home," he said.
Perth has undergone an explosive period since the pandemic, boosting the city's property markets after a relatively muted decade.
The +1.6 per cent growth seen in January continued a string of similar monthly gains, pushing Perth's median home price up by more than $110,000 over the past year.
Despite the significant growth, housing prices remain relatively affordable compared to most capital cities, with the median dwelling value just under $677,000. With Perth's population growing rapidly, the city's appeal may continue to push prices higher.
The Reserve Bank of Australia's efforts to control inflation have been challenging for homeowners and buyers, but the market remains active.
"Despite ongoing cost of living pressures, high interest rates, low consumer sentiment, and affordability constraints, homes are still selling," said Mr. Lawless.
High migration and tight rental markets are bolstering housing demand, incentivising renters to make the leap towards homeownership if feasible.
While 2023 was generally slower for regional markets than their capital city counterparts, the momentum has shifted in the past three months.
Looking at quarterly movements, growth for the combined regions has overtaken the capitals for the first time in nearly a year.
"While both the combined capitals and combined regional markets are losing momentum in the pace of value growth, the capital city trend has slowed more sharply, mostly due to the flattening of growth conditions in Melbourne and Sydney," Mr Lawless explained.
"Across the other states, regional WA, SA and Queensland continue to record a slower pace of growth relative to their capital city counterparts; these are also the three regional markets where dwelling values are at record highs."
Rising interest rates had a major influence on Australian property throughout 2023. In 2024, we may see rates begin to fall.
Eliza Owen, CoreLogic's head of residential research Australia, noted that "With inflation currently trending just below RBA forecasts, the case for a cash rate reduction is firming up in 2024."
With that in mind, she said "The broad expectation for housing values in 2024 is that the market will still grow but at a slower rate than the 8.1% observed in CoreLogic's Home Value Index in 2023."
Considering the current high interest rate environment alongside cost of living pressures and poor consumer sentiment, she said households may be "hesitant to make high-cost, high-commitment decisions."
But demand is still outweighing supply and "ongoing constraints in the construction sector are likely to keep a floor under home values."
Ms Owen concluded that, "Despite some of the headwinds for market demand, growth is still expected to be positive throughout 2024."
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