Key takeaways
CoreLogic’s national Home Value Index experienced a 0.3% increase in February, marking the end of a short and shallow downturn that lasted for three months.
The largest month-on-month change was observed in Melbourne and Hobart, both recording a 0.4% increase in home values. This is significant for Melbourne, as it breaks a streak of ten consecutive months of falling home values.
On the other hand, Brisbane, Perth, and Adelaide, which were previously the strongest growth markets, have lost their position to Melbourne and Hobart.
Market conditions have improved, partly due to a slowdown in the number of newly advertised homes for sale.
CoreLogic’s national Home Value Index saw a 0.3% rise in February, breaking the short and shallow three-month downturn. This increase was observed in every capital and ‘rest-of-state’ region, except for Darwin and Regional Victoria. The largest month-on-month change was recorded in Melbourne and Hobart, both experiencing a 0.4% increase in home values. This is significant for Melbourne, as it ends a streak of ten consecutive months of falling home values.
- Conversely, Brisbane, Perth, and Adelaide, which were previously the strongest growth markets, have now been outpaced by Melbourne and Hobart. While Adelaide and Brisbane still lead in rolling quarterly growth trends, with increases of 1.2% and 0.9% respectively, Perth’s value growth has slowed, resulting in a quarterly change of just 0.3%.
The return to growth in Sydney and Melbourne is primarily driven by the more expensive end of the market, with upper quartile house values leading the monthly gains in both cities. This aligns with previous research from CoreLogic, which indicates that premium housing markets in Sydney and Melbourne are most sensitive to rate cuts.
Improved market conditions may also be supported by a slowdown in the flow of freshly advertised ‘for sale’ listings. While total advertised supply levels are slightly higher than a year ago, listings remain below the previous five-year average. This reduced flow of fresh stock to the market could be contributing to upward pressure on prices.
Regional housing conditions continue to show a stronger growth trend compared to capital cities. Values across the combined regionals index rose 0.4% over the month and 1.0% over the rolling quarter, outperforming capital city values.
While housing markets have moved past the recent downturn, the trends from city to city and region to region remain diverse. The rate-cutting cycle is expected to continue, with financial markets predicting two more twenty-five basis point cuts by the end of the year. However, until home loan serviceability improves further, it is unlikely that housing markets will experience significant growth.
Markets that have experienced a more significant downturn, such as Hobart, ACT, and Melbourne, may be primed for stronger value growth due to their renewed affordability advantage. However, demand and supply factors also need to be considered.
A further lift in consumer sentiment would support purchasing activity in the housing market. Historically, there has been a close relationship between measures of consumer sentiment and the volume of home sales. While sentiment has already risen in the past six months, a return to more optimistic levels could lead to increased buyer activity.
Population growth is expected to slow, which could partially offset the rise in demand for housing from lower interest rates and a sentiment boost. This reduction in migration is likely to ease rental demand and, over the medium term, reduce demand for home purchasing.
Although it is currently a buyer’s market in some regions, such as Sydney, Melbourne, Hobart, and ACT, where inventory levels remain elevated, other regions like Perth, Adelaide, and Brisbane still face a shortage of homes available for sale.
Low levels of newly built housing are expected to provide some support to housing values in 2025. While residential construction activity has increased slightly in the detached housing sector, multi-unit dwelling commencements remain below average.
