Melbourne house prices keep falling; Sydney stable: CoreLogic, PropTrack

RBA’s rate hikes and economic conditions pushed some house prices lower in the closing months of 2023, but nationally, the annual gain was ‘solid’.

The impact of five interest rate hikes by the Reserve Bank in 2023 – adding to its eight increases in 2022 – cost of living pressures, affordability challenges, rising advertised stock levels and low consumer sentiment are keeping the heat out of the Australian housing market.

CoreLogic’s latest data, released Tuesday, shows the national home value index (HVI) rose 8.1 per cent in 2023, a significant turnaround from the 4.9 per cent drop seen in 2022, but well below the 24.5 per cent surge recorded in 2021.

December’s national 0.4 per cent increase in prices saw 2023 finish with a relatively soft monthly rise in home values.

“This was the smallest gain in our national monthly HVI since values started rising in February,” CoreLogic’s research director Tim Lawless said.

After monthly growth in home values peaked in May at 1.3 per cent, rate hikes and economic conditions progressively took some heat out of the market through the second half of last year, he said.

The year was “punctuated by diversity”, with the annual change in housing values ranging from a 15.2 per cent surge in Perth to a 1.6 per cent fall across regional Victoria.

Among capital cities, Melbourne values declined 0.3 per cent in December, while Sydney home values stabilised with a monthly growth rate of just 0.2 per cent.

But on an annual basis, Sydney house values jumped 11 per cent, Brisbane recorded a 13 per cent gain, while Melbourne was up 3.5 per cent.

Smaller capital cities were soft through most of the year, with Hobart down 0.8 per cent and Darwin off 0.1 per cent for 2023, while the ACT recorded a rise of just 0.5 per cent. Adelaide was a strong gainer, up 8.8 per cent.

Sydney house prices have stabilised. Picture: Gaye Gerard

CoreLogic highlighted dwelling values have been rising at more than 1 per cent each month on average across Perth, Adelaide and Brisbane since May last year, while in Melbourne and Sydney the pace of growth has slowed sharply since the June rate hike.

“Such diversity across the capital cities can be broadly attributed to factors relating to demand and supply,” Mr Lawless said.

“In Perth, Adelaide and Brisbane, housing affordability challenges haven’t been as pressing relative to the larger cities, and advertised supply levels have remained persistently and substantially below average.”

Across the combined capital cities index, dwelling values were up 9.3 per cent in 2023, more than double the 4.4 per cent rise recorded across the combined regional index.

“Stronger conditions across capital city markets is a reversal of the early Covid trend, which saw regional markets experience higher demand amid strong internal migration,” Mr Lawless said.

“Regional migration trends have mostly normalised through 2023, and the significant capital gains recorded through 2020 to 2022 has meant many regional markets have become less affordable.”

PropTrack’s home price index, also released on Tuesday, recorded steady prices in December, rounding out a “solid year” of growth.

Perth’s housing market saw the biggest gains in 2023.

The report found that regional home prices rose 0.2 per cent in December, counteracting the 0.1 per cent decline in the combined capital cities.

Melbourne has been the weakest performing property market in the nearly four years post-Covid, with prices sitting just 15.5 per cent higher compared to March 2020, the report said.

Meanwhile, Perth was the strongest performing property market in 2023, recording the highest growth of any capital city or regional area.

Overall, prices nationally rose by 5.5 per cent in 2023, according to PropTrack.

“Several factors contributed to the slowdown in home prices over the last quarter of 2023,” PropTrack economist Anne Flaherty said. “There was an additional interest rate rise as well as an increase in the supply of homes listed for sale, which provided buyers more choice and helped to alleviate competition.”

But despite the cool down in capital city prices seen over December, prices in 2024 will be supported by population growth and what looks likely to be a more stable interest rate environment, she said.