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Australia’s housing market is feeling the strain as rising interest rates and affordability pressures reshape the property landscape. CoreLogic’s January 2025 Housing Chart Pack revealed that while residential real estate remains the country’s largest asset at $11.1 trillion, its performance has slowed, with total returns for 2024 falling behind the stock market.
Property delivered an 8.3% return last year, compared to 11.4% for equities—a shift attributed to the cooling effects of high interest rates and a growing pool of available homes.
“The accumulation of stock, and the higher for longer interest rate environment, has seen the change in dwelling values slow, and, in some cities, shift into negative territory,” CoreLogic economist Kaytlin Ezzy said.
National home values dipped 0.1% in the December quarter, marking the first quarterly decline since early 2023. The affordable end of the market saw the strongest growth, with lower quartile values rising 9.9% for the year, compared to just 2.1% for the pricier upper quartile.
Meanwhile, home sales softened towards the year’s end, with December activity down 1% compared to the same period in 2023.
Buyers also took longer to make decisions in late 2024, pushing the median days on market to 33, up from 28 earlier in the year. Still, sellers appeared willing to adjust, with vendor discount rates narrowing slightly to -3.6%, reflecting more realistic pricing.
The rental market is also feeling the effects of shifting conditions. Growth in rents slowed to 4.8% in 2024, compared to 8.1% the year before. Ezzy pointed to easing net overseas migration and higher average household sizes as factors behind the cooling demand.
“With rental affordability near record highs, more potential renters may be delaying leaving the family home or are looking to form larger share houses as a way of distributing the additional rental burden,” Ezzy said.
Despite the challenges, housing continues to hold its own as a long-term investment. Over the past decade, total returns from property slightly edged out equities, standing at 132.6% compared to 126.4%.
“Whether it’s housing or equities, it’s normal to see some market volatility. Regardless of asset type, time on the market has beat timing the market,” Ezzy said.
