House prices at ‘record high’ as property market rebounds

Experts have been left shocked by what is happening to house prices across Australia, and they have given a bleak warning.

House prices are at new record highs — with the most rapid decline in values in recent history now fully reversed and housing affordability now at its “worst level” in over three decades.

Australia’s housing market endured a challenging period in 2022 - with successive interest rate hikes rapidly decreasing borrowing capacity and limiting potential buyers in the market.

But data from PropTrack’s September Home Price Index shows that national prices have now recovered 2022’s falls entirely.

Prices are up 4.31 per cent so far this year.

All capital cities except Darwin saw prices rise in September.

Adelaide, Brisbane and Perth are the strongest markets and sitting at peak prices, with Sydney just 0.03 per cent away from reaching pandemic heights.

In Brisbane, home prices have already regained 2022’s price falls and are rising at a fast pace, jumping 0.39 per cent in September to hit a new price peak.

All capital cities except Darwin saw prices rise in September.

Melbourne market ‘sluggish’

The news is less promising for Melbourne.

The country’s second-largest market is still sluggish to react to changed conditions after bearing the brunt of the post-pandemic slump.

Prices are still 4.27 per cent below pandemic highs, with home prices rising 0.25 per cent last month.

But it is Hobart that is really lagging behind, sitting at 6.6 per cent below peak levels.

Regional markets remain down 0.78 per cent from their April 2022 peak but regional South Australia and Queensland continue to outperform other markets.

‘Surprising’ results

Anne Flaherty, an economist, PropTrack told news.com.au the promising figures for capital cities were “surprising”.

Ms Flaherty said there were “a range of factors” that could be attributed to the rebound.

“Home price growth has been driven by record levels of net overseas migration, tight rental markets and a housing shortage,” she said.

“What we are really seeing is an imbalance between supply and demand. Even though the supply of properties for sale picked up over September, so too has buyer demand which means there remains high levels of competition out there.”

The situation continues to frustrate first home buyers.

“The average buyer can borrow 30 per cent less, yet we have still seen property prices continue to climb despite high interest rates.”

But she noted regional areas were experiencing much less “pronounced” growth.

“Regional areas saw really hot demand during the pandemic which drove really strong price growth. While demand is still strong, it has lessened,” she said.

“We don’t think demand will go backwards and prices are predicted to continue rising off the back of population growth, but we don’t expect it to be as strong as it was during the pandemic years.”

As for the future?

“Looking ahead, interest rates have likely peaked, and population growth is rebounding strongly,” she said.

“Together with a shortage of new home builds, prices are expected to rise.

“As we head further into spring, more markets are likely to reverse 2022’s fast falls to set new peaks.”

Difficult times ahead for first home buyers

The situation continues to frustrate thousands of hopeful first home buyers.

First home buyers unable to break into the housing market in coming months may find it even more difficult to buy next year as prices continue to rise.

“For first home buyers, conditions have never been tougher,” Ms Flaherty acknowledged.

“As home prices reach new peaks, the amount first home buyers need to save for a deposit continues to grow.

“At the same time, interest rates remain incredibly high, driving monthly repayments higher and limiting the amount first home buyers can borrow.”

Ms Flaherty described housing affordability at its “worst level” in over three decades.