National home prices experienced a rebound in February, increasing by 0.40% and reaching a new record high, according to the latest PropTrack Home Price Index. This bounce has reversed the small price declines seen in recent months, with national prices now sitting 3.94% higher than they were a year ago.
Capital cities, which had previously seen small price falls, also led the bounce in prices, rising by 0.45% in February. In contrast, regional areas recorded a 0.28% increase in prices over the month. Both capital cities and regional areas are currently at record-high prices.
Melbourne and Sydney were the top performers in terms of price gains in February, with Melbourne experiencing a 0.67% increase and Sydney seeing a 0.50% increase. The only capital city to see prices fall was Hobart, with a slight decline of 0.03%.
Melbourne also led the price gains for both houses and units across the capital cities, marking the first time since February 2020 for houses and September 2020 for units.
Over the past quarter, Melbourne and Sydney have seen the fastest acceleration in home price growth, following behind Darwin. On the other hand, Adelaide, Hobart, and Perth have experienced the fastest deceleration in price growth.
Although growth has slowed in Perth, Adelaide, and Brisbane in recent months, they remain the strongest performing capitals over the past year, with price increases of 13.12%, 11.91%, and 10.21%, respectively.
Interestingly, while capital cities led the price rebound, regional areas have actually outperformed capital cities in terms of annual growth. Regional areas have experienced a growth rate of 4.54%, surpassing the 3.70% growth rate of capital cities. This can be attributed to poor affordability and a surge in housing options during the spring season, which has tempered price growth in the capitals.
According to Senior Economist Eleanor Creagh from PropTrack, the rebound in home prices can be attributed to falling interest rates. The prospect of rate cuts had already boosted market sentiment, leading to stronger clearance rates in every capital city compared to the end of 2024.
Looking ahead, it is expected that prices will continue to rise, and interest rates are expected to fall further. However, the rate cutting cycle is expected to be modest, and the starting point for affordability may temper the pace of home price growth compared to previous easing cycles.
In conclusion, the rebound in national home prices in February has reversed the small price declines seen in recent months. Capital cities have led the bounce in prices, with Melbourne and Sydney experiencing the fastest acceleration in price growth. Despite this, regional areas have outperformed capital cities in terms of annual growth. Falling interest rates have played a significant role in boosting market sentiment and driving renewed demand and price growth.
