Australian Housing Market Insights: October 2024 Price Trends
Introduction: October Sees Surging Demand in Australia’s Housing Market
As Australia’s spring selling season hits its peak, October has brought renewed energy to the housing market. After a cooldown through winter and early spring, national home prices have lifted by 0.26% month-over-month, reaching a 5.62% increase year-over-year.
Buyer interest remains robust, defying affordability challenges, and new listings are coming to market to meet the demand. In this post, we’ll dive deep into the data from October 2024, exploring what’s driving these trends and what it means for buyers, investors, and market observers alike.
October 2024: National Housing Market Snapshot
National Price Growth: October saw a 0.26% lift in home prices nationally, pushing year-over-year growth to 5.62%, marking 22 consecutive months of growth.
Regional Disparities: Growth across the nation remains varied. While Perth, Adelaide, and Brisbane have led annual gains, cities like Melbourne have started to see price reversals, creating a dynamic market landscape.
Regional Performance: Certain regional areas have gained traction, with South Australia and Queensland seeing robust increases, while regional Victoria remains subdued.
This October data suggests a market where national trends are stable, yet regional markets are showing diverging trends, each with unique factors affecting supply and demand..
Capital City Highlights: Where the Growth Momentum Is Strongest
Perth, Adelaide, and Brisbane Lead Annual Growth: Perth, Adelaide, and Brisbane have emerged as leaders in annual property value growth, with Perth’s prices climbing an impressive 20.58% year-over-year. These cities are benefiting from limited inventory and strong demand, which has led to a highly competitive market. In Perth and Adelaide especially, affordability remains a key driver, attracting more buyers.
Melbourne’s Surprise Recovery: After experiencing six months of price declines, Melbourne saw a 0.49% increase in October, the highest monthly growth among the capitals. The spring selling season seems to have reinvigorated buyer interest, as more properties came onto the market and buyers took advantage of Melbourne’s comparative affordability. Notably, Melbourne’s median prices are now comparable to Adelaide’s, signaling a potential long-term trend shift as buyers find greater value in Melbourne’s suburbs.
Sydney and Other Cities Maintain Steady Gains: Although Sydney didn’t top the growth charts, its prices still rose by 0.28% in October. With more supply on the market, Sydney has seen a stable price increase over the past year, largely due to pent-up demand and a strong spring selling season. Other capitals like Darwin, however, saw price drops, highlighting mixed market conditions across the country.
Key Demand Drivers: Affordability, Supply, and Interest Rates
The resilience of the Australian housing market, even with affordability challenges and high-interest rates, speaks to the underlying demand dynamics:
Buyer Demand Remains Robust: Despite affordability challenges, buyers remain active. This demand stems from multiple factors: population growth, low rental vacancy rates, and equity gains in existing properties. These elements, together with limited supply, have continued to support home price growth.
Interest Rates Create Mixed Effects: While high-interest rates generally reduce borrowing power, they have also tempered price surges. As a result, buyers now have more opportunities to enter the market, particularly in cities where price growth has slowed. Additionally, recent tax cuts in July have helped boost borrowing capacity, giving some buyers a renewed ability to compete.
Market Outlook Amid More Supply: The spring season has brought an increase in new listings, which has slightly eased supply constraints. This availability is good news for buyers, though demand still outweighs supply, particularly in cities with the tightest housing inventory like Perth and Adelaide.
Spring Selling Season and Regional Market Performance
The spring selling season has brought more listings to the market, offering buyers more options and slightly easing supply pressures. However, regional performance has varied significantly:
Higher Supply, Diverse Impact on Prices: Although more homes on the market generally temper price growth, some areas have retained high levels of buyer demand. This demand is creating a multi-speed market, with hotspots like regional South Australia (+0.57%) and Queensland (+0.34%) showing strong monthly growth.
Regional Victoria Faces Slower Growth: In contrast, regional Victoria has struggled, with prices down 1.51% year-over-year. Unemployment rates in Victoria have risen, contributing to weaker demand. Additionally, higher property taxes in Victoria, particularly for investment properties, have shifted the balance for investors, causing more to offload rather than buy.
House vs. Unit Price Trends: Demand for Space Versus Affordability
In October, houses once again outpaced units in terms of price growth, with house prices rising by 0.27% month-over-month compared to a 0.19% rise for units. This trend is driven by several factors:
Pandemic’s Long-Term Impact: Since the pandemic began, the demand for houses (which offer more space) has consistently outperformed demand for units. Nationally, house prices are up 50% from the pandemic’s onset, compared to just 26% for units.
Affordability and City Living Shift: Rising affordability pressures are making units an attractive option in cities where house prices have soared. Brisbane, for instance, saw unit prices rise by 16.88% over the past year, surpassing house growth (11.75%). This trend aligns with affordability shifts, with units becoming a more accessible option for those seeking proximity to city amenities without the premium of a house.
What’s Ahead: Market Projections for Late 2024 and Beyond
With the peak of the spring selling season winding down, the Australian property market is expected to continue a moderate pace of growth through the end of 2024:
Sustained Price Growth with Potential Rate Cuts: While high-interest rates have created affordability constraints, any future rate cuts could reinvigorate buyer demand. If borrowing becomes easier, prices in the most competitive markets like Perth and Adelaide could see additional gains. Rate cuts remain uncertain, but if they materialize, they would likely bolster demand and reinforce price growth across high-demand regions.
Supply Constraints Persist: Despite the increase in listings during spring, supply remains limited compared to historical levels. Population growth and limited building activity, combined with cost and labor challenges in construction, have exacerbated the housing shortage. This supply issue is expected to maintain competitive pressure on prices, especially in high-demand areas.
Affordability-Driven Demand in Regional Markets: Regional markets with relatively affordable housing options are likely to attract both first-time buyers and investors. Areas such as regional Queensland and South Australia are likely to see continued growth as buyers look for value outside of the most expensive capital city markets.
Key Takeaways for Buyers and Investors
Opportunities for First-Time Buyers: Buyers looking for affordability may find more opportunities in regional areas, where growth has been steady but not as intense as in the capital cities. First-time buyers could consider these areas as a foothold into the housing market.
Investor Insight: Investors might look to cities like Perth and Adelaide, where rental yields are high, and competition remains strong. Victoria’s increased taxes on investment properties may lead some investors to sell, potentially creating buying opportunities.
Navigating Multi-Speed Markets: Investors and homebuyers should consider the unique growth patterns across cities and regions. Perth and Adelaide’s relatively affordable housing, coupled with tight supply, may make these cities attractive for longer-term investment.
Conclusion: An Evolving Market with Persistent Demand
The Australian housing market has shown remarkable resilience in October 2024, with a renewed surge in demand despite affordability constraints. While affordability and high-interest rates pose challenges, demand remains fueled by factors like population growth, buyer activity, and limited supply. Each market—capital cities and regional areas alike—presents unique dynamics that both buyers and investors should carefully consider.
As the year draws to a close, the Australian property market offers a mix of opportunities and challenges. By keeping an eye on supply trends, regional disparities, and potential rate changes, buyers and investors can make well-informed decisions to navigate Australia’s evolving housing landscape.
Reference: PropTrack Home Price Index - October 2024