Rate rises have put the brakes on house price growth in Australia’s biggest cities, but values across the rest of the country are still climbing higher.
Australia’s median home value declined by 0.1% in April, with the fall in prices following back-to-back rate hikes by the Reserve Bank in February and March.
It was the first month of declines at the national level this year, and comes after price growth began to slow last month following the RBA’s resumption of the rate rise cycle to combat inflation.
But even though prices fell last month, the national median house price is about $105,000 higher than a year ago, reflecting the boost to home values following last year’s rate cuts.
Home prices are up 8.5% in the past 12 months at the national level, with stronger growth in the regions (up 10.7%) than the capitals (up 7.7%).
REA Group senior economist Eleanor Creagh said April’s decline marked a turning point in the housing cycle.
“Momentum has clearly slowed, marking a transition from broad-based growth to a more uneven, multi-speed phase,” she said.
“Auction clearance rates have softened pointing to a growing mismatch between buyer and seller expectations.
“At the same time, higher interest rates are reducing borrowing capacity, while uncertainty is weighing on confidence.”
How home prices changed around Australia in April
While the national figure points to declining prices, values didn’t move in sync across all the capitals and regions last month.
In fact, prices rose or remained flat in most markets, and are at record highs in most capitals and regional areas, with the national median dragged down by price declines in Australia’s two largest cities.
Prices in Sydney fell by 0.5% in March, while Melbourne prices declined by 0.3%.
These cities also recorded the slowest annual price growth, with Sydney values 3.8% higher than a year ago, and Melbourne 1.9% higher.
Prices have cooled in Melbourne's inner east in recent months as rate hikes hit dent borrowing power. Picture: realestate.com.au/sold
“Rate-sensitive inner-city markets are leading the shift, particularly in Sydney and Melbourne, where price declines have emerged after back-to-back interest rate rises,” Ms Creagh said.
House prices in Melbourne’s inner east were down about 2.5% in the past three months, while Sydney’s eastern suburbs recorded a 2.4% fall.
It was a very different story across the rest of Australia, with prices up 21.5% in Perth, 17.5% in Brisbane, 16.9% in Darwin and 13.9% in Adelaide in the past year following modest gains during April.
The value of a typical house has gone up about $208,000 in Perth, $182,000 in Brisbane and $132,000 in Adelaide in just 12 months.
Prices have reached a new high in Hobart amid increased competition between first-home buyers and mainland investors. Picture: realestate.com.au/buy
Hobart had the highest monthly growth with values rising 0.3% in March as the city’s median value pushes to new record highs.
Demand from first-home buyers, investors and people relocating for the cooler climate had helped support price growth recently, according to Hobart real estate agent and EIS Property director Penny Connor.
“There’s lots of first-home buyer activity and lots of buyers agents from the mainland,” she said.
“The fact that it’s quite affordable has helped create competition in the market.”
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Regional Australia recorded stronger gains than the capitals last month, with prices up 0.3% in regional NSW and Queensland, and 0.4% in regional South Australia.
Many of the strongest markets nationally were in regional areas or satellite cities of the capitals, including Mandurah in Western Australia (up 23.5%), Toowoomba in Queensland (up 18.7%), and the New England region of NSW (up 15.4%).
Another rate hike still on the table
The RBA is expected to raise interest rates next week following a surge in inflation – a move that would fully reverse last year’s rate cuts.
But despite rate hikes increasing the chances of further price declines in the months ahead, Ms Creagh said a major downturn wasn’t likely, especially amid Australia’s housing supply crunch.
“While price growth is expected to slow, a large correction remains unlikely,” she said.
“Strong equity buffers, a resilient labour market and limited forced selling are helping to stabilise conditions and cushion price falls.”
“Population growth and ongoing supply constraints exacerbated by higher construction costs and elevated interest rates continue to place a floor under prices.”
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