A typical Australian home costs more than ever before, but several triggers could combine to keep pushing up prices for the rest of the year.
Australia’s median home value rose a further 0.2% in April to reach a record high, according to the latest PropTrack Home Price Index.
A typical Aussie home is now worth $805,000 after rising 3.7% in the past year. The median house price has reached $883,000, while the median unit price is $659,000, the data shows.
But while growth was a little slower in April than earlier in the year, a convergence of factors after the upcoming federal election could reignite price growth.
REA Group senior economist Anne Flaherty said an interest rate cut in May — which is all but guaranteed after quarterly inflation landed in the Reserve Bank’s target band — could accelerate price growth this year.
“February’s rate cut, as well as expectations that further cuts are on the cards, are supporting buyer sentiment,” she said.
“Should interest rates fall in May, we may see the rate of growth pick up again as borrowing capacities increase and mortgage repayments decline,” she said.
Reserve Bank governor Michele Bullock has previously stated any decision to cut interest rates will depend on the data, which now shows inflation is within the RBA's target band. Picture: NewsWire / John Appleyard
Ms Flaherty said further price growth in the year ahead could be driven by three factors: falling interest rates, first-home buyer incentives and the ongoing housing supply shortage.
“With housing affordability a key issue at the upcoming federal election, both Labor and the Coalition have announced policy incentives for first-home buyers,” she said.
“As a result, many of these buyers may be biding their time to get into the market after the election and the launch of these policies.”
“Whichever party is elected, the combination of increased first-home buyer incentives, lower interest rates, and supply side challenges are expected to contribute to even higher property prices in 2025.”
How home prices changed around Australia in April
Adelaide has taken the lead as Australia’s fastest growing capital city property market, with home values up 10.77% over the past year after a 0.3% rise in April, which was the fastest rise of all the capitals last month.
Perth, which has consistently been the nation’s strongest market for several years, has slowed, with values growing 0.1% last month. That said, prices are up 9.3% in the past year, making it the second-best performing capital city in terms of price growth.
Brisbane prices rose 0.19% last month, and are up 8.7% over the past year.
“The rate of price growth is moderating in outperforming cities such as Perth, Adelaide and Brisbane, while underperformers such as Melbourne, Canberra and Sydney have started to pick up,” Ms Flaherty said.
“This is lessening the divergence in home price growth seen across the country over the past year.”
This two-bedroom house on a big block in Coorparoo in inner Brisbane sold for $1.8 million last month. Picture: realestate.com.au/sold
Melbourne’s recovery gained a little more steam, with prices climbing a further 0.25% last month. Values are still 1.7% lower than a year ago and 4% lower than the peak in March 2022.
The city's price growth has lagged the other capitals in recent years, but its relative affordability has coaxed more buyers into the market.
Inner Melbourne has experienced a notable uptick recently, with unit prices up 5.9% and house prices up 3.5% in the past three months.
Inner Melbourne is the city's strongest market in the past quarter. This two-bedroom Brunswick terrace sold for $1.135 million last month. Picture: realestate.com.au/sold
Sydney property prices rose 0.1% in April, and are now 2.5% higher than a year ago.
"In comparison to many of the other capitals, price growth has been relatively modest in Sydney over the past 12 months," Ms Flaherty said.
The city’s median house price is now $1.465 million, while a typical unit costs $819,000.
The strongest growth has been in the city's more affordable west, where prices are up about 5% in the past year, while annual growth in the pricier eastern suburbs and northern beaches sits at about 1%.
This five bedroom house in Harrington Park in Sydney's outer south west sold for $1.435 million in April. Picture: realestate.com.au/sold
"Across all states, the best performing regions tend to be in more affordable areas," Ms Flaherty said. "Though, with prices rising more quickly in these regions, affordability is becoming more challenged."
Affordable units are hot property
When breaking the data down by property type, Brisbane units are now Australia’s hottest property, growing in value by 13.2% over the past year to a median price of $683,000. Perth units are close behind with 12.9% annual price growth to $571,000.
Unit price growth in both cities outpaced that of houses, which have increased in value by 7.9% in Brisbane and 8.9% in Perth in the past year.
Units are outpacing houses in Brisbane as affordability constraints push buyers towards less expensive properties. Picture: Getty
Brisbane real estate agent Michael Kafantaris of Place Estate Agents New Farm said relative affordability of units and value compared with houses, as well as steep rental price increases, had pushed more first-home buyers towards apartments.
“Because rental demand has gone bananas, prices have followed suit,” he said. “People think ‘I can rent this for $650 a week or own it for $700 a week’.”
“Younger people then get scared of missing out and want to jump on the ladder before its too late.”
A two-bedroom unit in this resort-style complex in Toowong sold for $790,000 last month. Picture: realestate.com.au/sold
At the national level, houses had stronger price growth last month, rising 0.24% while units were flat.
But units were slightly ahead in the past year, up 3.9% compared with 3.7% price growth for houses, and have edged ahead in regional areas, up 5.34% compared with 4.49% for houses.
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Ms Flaherty said houses had historically had stronger capital growth than units, but high construction costs had led to fewer apartments being developed recently, and more buyers were seeking units given challenged affordability.
“With affordability constraints pricing many buyers out of purchasing a house, a growing share are looking to purchase units,” she said.
“This relative increase in demand at the more affordable end is expected to continue contributing to the performance of unit prices in the coming years.”
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