Mixed fortunes in capitals as property market resists ‘mortgage cliff’ fears

Predictions of a mortgage cliff nad property fire sales failed to eventuate through 2023, with prices instead undergoing a surprise rebound and finishing 5.52 pr ent higher over the past 12 months, according to property researcher PropTrack.

Property prices finished 2023 steady after an unexpected rebound during the year, ultimately regaining prior losses as a shortage of homes affected the market.

Housing researcher PropTrack’s monthly Home Price Index revealed residential prices rose 5.52 per cent nationally last year, including 11 consecutive months of gains capped by a month of neutral growth (0 per cent) in December.

Thirteen interest rates in little more than 18 months did not have the devastating impact on the property market as first feared.

Despite capital city “mortgage belt areas” being hit with thousands extra in repayments each year on top of other cost-of-living pressures, predictions of property fire sales following the expiration of record low fixed-rate deals as part of the “mortgage cliff” failed to eventuate. Meanwhile, demand remained robust and buyers kept home sales ticking over.

Half of Australia’s eight capital cities hit new price highs in 2023, with major centres outperforming regional counterparts (up 3.20 per cent annually) for much of the year. However, the resilience of prices could not be maintained through December, with capital city prices falling 0.09 per cent, to finish the year up 6.44 per cent.

PropTrack economist Anne Flaherty said the latest interest rate rise and greater buyer choice after an increase in homes listed for sale are among factors that contributed to the slowdown in prices in the last quarter of 2023.

“Even though recent months have seen a rise in the number of properties listed for sale, overall supply remains relatively constrained, particularly in Perth and Brisbane,” Ms Flaherty said.

“This has been a key contributor to price rises in these markets.

“Despite the cooldown 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.”

PropTrack economist Anne Flaherty

Perth was the best-performing major city for the year, gaining 14.75 per cent through 2023 and 0.69 per cent in December alone. The rise was largely linked to fewer homes hitting the market and greater buyer competition.

Ms Flaherty said: “Those properties that are hitting the market are attracting high levels of buyer interest and properties are selling at close to record speeds.”

It was a similar story in Adelaide and Brisbane, where prices rose 10.89 per cent and 10.45 per cent, respectively, last year, after consistently posting monthly gains. While the South Australian capital benefited from relative affordability, Queensland’s River City was supported by high levels of population growth post-Covid.

Sydney property prices were at fresh highs for several months last year until December, when prices fell (down 0.08 per cent) for the first time in 11 months, which brought the annualised growth rate back to 7.72 per cent for 2023.

But gains were not equal across the country.

Picture NCA Newswire/ Gaye Gerard

Hobart property prices finished 3.5 per cent lower in 2023 as the market continues to reset after becoming overheated through Covid. Ms Flaherty said demand from buyers has since returned to normal levels.

The weakest property market in the post-Covid era is Melbourne, where gains have failed to maintain traction for the past four years. Homeowners only gained 0.89 per cent over the entirety of 2023 and 15.5 per cent since the pandemic began in March 2020.

Similarly, the country’s second-most expensive city for housing, Canberra, gained just 0.25 per cent last year.

The notoriously volatile Darwin market finished the year 1.49 per cent lower.

Houses continued to record greater growth than units nationally, up 5.68 per cent compared to 4.73 per cent.

Regional Queensland and South Australia were the key drivers of growth in regional markets in the past 12 months.

Property prices are expected to continue growing through 2024, albeit at a slower rate than last year.