February Sees Steady Increase in Australian Capital City Home Values
In the month of February, Australian home values experienced a steady increase nationwide, with a rise of 0.6 percent. However, the jump was even higher in certain cities such as Perth, Adelaide, and Brisbane. According to research conducted by Core Logic, Perth saw a significant increase of 1.8 percent in home values in just one month, while Adelaide experienced a jump of 1.1 percent, and Brisbane leaped by 0.9 percent.
Canberra also witnessed an increase of 0.7 percent in dwelling values, while Sydney saw a climb of 0.5 percent, and Melbourne and Darwin experienced a more modest increase of 0.1 percent in house prices. On the other hand, Hobart was the only capital city that recorded a fall, with home values declining by 0.3 percent within a month.
Core Logic research director, Tim Lawless, suggests that there are potential early signs of a boost in housing confidence as inflation eases and rate cut expectations become more certain. Despite high-interest rates and cost of living pressures, housing values have remained resilient. Lawless emphasizes that the ongoing rise in housing values reflects an imbalance between supply and demand across different cities and regions.
Over the past year, Perth home values have soared by an impressive 18.3 percent, while Brisbane house prices surged by 15.6 percent, and Adelaide house prices ascended by 11.8 percent. Sydney home values have risen by 10.6 percent, Melbourne house prices by 4 percent, and Canberra by 1.6 percent within the last 12 months. However, Hobart prices have fallen by 0.6 percent, and Darwin prices have slipped by 0.1 percent in the same time frame.
When looking at all capital cities combined, dwelling values have risen by 10 percent, while regional house prices have jumped by 5.5 percent in the span of a year.
The median home value in Sydney stands at $1.128 million (US$733,000), making it the highest in the nation. Canberra follows closely behind with a median home value of $840,103. In Brisbane, the median value is $805,593, compared to $778,941 in Melbourne (including apartments), and $727,142 in Adelaide. The median value of a home in Perth is $687,004, while it is $652,645 in Hobart and $499,834 in Darwin. Across the entire country, the median price of a home is $842,109. In regional Australia, the median value of a home is $612,096.
Core Logic has noted that the value growth has been accompanied by an increase in auction clearance rates, which averaged at 60 percent in February. This suggests a better fit between buyer and seller pricing expectations. Lawless emphasizes that auction results and sentiment have a strong relationship with housing trends.
Housing turnover is higher than it was at the same time last year but still lower than the previous five-year average according to Core Logic. Lawless suggests that if sentiment continues to improve, the volume of home sales could pick up later this year.
In addition to rising home values, rents have also increased in February. Rents rose by 0.9 percent within the month, which was the second-highest jump since March last year. Across the country, rents rose by 2.4 percent within a quarter, marking the biggest uptick since May last year.
The national rental index soared by 8.5 percent in the 12 months ending in February. Core Logic notes that rental growth in houses has been trending up since October last year, while unit rent growth has eased from 14 percent in April last year to 9.6 percent.
Lawless suggests that the slowing pace of unit rent growth aligns with the peak in net overseas migration in the first quarter of 2023. However, worsening affordability pressures could also be a factor, as unit rents have surged by 24.1 percent over the past two years, compared to a 16.6 percent increase in house rents.
Among capital cities, Perth has experienced the fastest rate of rental growth, with a yearly increase of 13.5 percent. Melbourne follows closely behind with a rise of 11.3 percent, while Sydney saw an increase of 8.9 percent, Adelaide experienced an 8.4 percent rise, and Brisbane rose by 7.5 percent. Darwin rentals rose by 3.3 percent, while Canberra rentals declined by 0.7 percent, and Hobart fell by 1.8 percent.
When it comes to rental units, Perth experienced a significant increase of 16.5 percent, followed by Brisbane with a rise of 12.3 percent, Sydney with a rise of 10.2 percent, Melbourne with a rise of 10 percent, and Adelaide with a rise of 9.7 percent. Darwin rentals rose by 2.6 percent, while Canberra saw an increase of 0.9 percent and Hobart experienced a decline of 3.4 percent.
Core Logic notes that Perth is currently experiencing a faster rate of rental growth among capital cities, with “little evidence” of it slowing down. The same factors that are rapidly pushing home values higher in Perth are also at play in the rental sector.
Researchers also highlight that gross rental yields are holding steady across most markets and even increased nationally towards the end of 2023. The rise in rental yields can be attributed to rental rates rising at a faster rate than dwelling values since November 2023. Although yields are roughly in line with pre-COVID levels at a national level, they are well above the record lows seen in 2021.
In conclusion, Australian capital cities have seen a steady increase in home values, with Perth, Adelaide, and Brisbane experiencing significant jumps. Auction clearance rates have also improved, indicating a better fit between buyer and seller pricing expectations. Rents have risen across the country, with Perth leading the way in rental growth. The housing market continues to show resilience despite high-interest rates and cost of living pressures. Overall, the data suggests a positive trend in the Australian real estate market, with potential for further growth in the coming months.
