The PropTrack Home Price Index has reported a significant surge in national home prices, reaching new highs as the market responds to increased demand and limited supply.
“National home prices hit a new record high in February, lifting 0.45%, the largest monthly rise since October 2023,” said Eleanor Creagh (pictured above), senior economist at PropTrack.
This increase pushes the prices up by 0.82% for the year, culminating in a 6.15% rise compared to the same period last year, the fastest annual growth since July 2022.
2024 has seen a busier start with more homes entering the market, providing buyers with more options. Despite the influx of new listings, demand has remained strong, buoyed by the anticipation of falling interest rates in the latter half of 2024.
Auction volumes and clearance rates in the first two months of 2024 have also consistently outperformed those in the same period of 2023, reflecting improved market conditions.
“Housing demand has been buoyed by population growth, tight rental markets, resilient labour market conditions and home equity gains,” Creagh said.
“Meanwhile, the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing. These factors combined have supported prices.”
While all capital cities, except Hobart (-0.12%), experienced price increases in February, Adelaide (+0.81%), Perth (+0.56%), Sydney (+0.55%) and Brisbane (+0.54%) led the growth, the PropTrack report showed.
Smaller capitals like Perth, Adelaide, and Brisbane lead, with year-over-year price jumps of 16.32%, 12.76%, and 12.16%, respectively. So far this year, they remain top performers, with Adelaide up 1.46%, Perth 1.22%, and Brisbane 1.17%.
“The relative affordability of these cities, population growth, and very tight rental markets are supporting home values, while low stock levels are intensifying competition amid strong buyer demand, resulting in a sellers’ market with home prices continuing to rise at a fast pace in 2024,” Creagh said.
Despite capital cities outpacing regional areas in terms of price growth so far this year, regional markets have not been left behind.
Capital city home prices rose 0.88% year to date, hitting a new peak with a 0.48% increase in February, while regional prices also reached a record after a 0.33% rise in February, up 0.65% for the year and 3.83% higher than February 2023."
Over the past year, house prices have risen by 6.29%, outstripping unit prices, which saw a 5.49% increase. This trend, which began during the pandemic, has seen house values soar by 42.6% from pre-pandemic levels, compared to a more modest 20.5% rise in unit values. The pandemic has markedly shifted housing preferences, leading to a significant outperformance of houses over units in the majority of regions.
However, February showed a change in momentum, with unit prices growing at a faster rate of 0.80% compared to houses at 0.38%. This brings unit price growth to 1.26% year to date, against house price growth of 0.73%, indicating a strong start for the unit market in 2024.
“Housing affordability has deteriorated significantly as interest rates have risen and the apartment market offers a relative discount,” Creagh said.
“Strong demand for inner-city living post-pandemic, coupled with the rapid rate of population growth and housing supply constraints alongside the relative value units offer are likely buoying buyer demand and pricing in the apartment market.”
With the rapid population growth and continued tight supply, Creagh said PropTrack expects home prices to further increase in the coming months, especially with the anticipation of interest rate reductions in the second half of 2024.
“Looking ahead, the positive tailwinds for housing demand and a slowdown in the completion of new homes are likely to offset the impact of reduced affordability and a slowing economy,” she said.
“As a result, prices are expected to lift further in the months ahead, particularly while the expectation remains that interest rates will move lower in the second half of 2024.”
Moreover, in Brisbane, Adelaide, and Perth, buyers face more limited choices, intensifying competition due to the scarce housing supply against demand, suggesting prices may keep rising quickly.
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