May Market Update

Despite interest rate hikes and affordability concerns, Australia's property market continues to thrive in the first half of 2024.

Australia's residential housing market has reached a staggering new high, with the total value of the nation's 11,176,100 residential dwellings rising to an incredible $10.72 trillion in the first quarter of 2024. This impressive figure comes despite the challenges posed by elevated interest rates and a cost-of-living crisis, highlighting the resilience and strength of the Australian property market.

According to new data released by the Australian Bureau of Statistics, the average price of residential dwellings increased by $14,300 to $959,300 in the March quarter, with all states and territories experiencing growth in the total value of residential dwellings. This remarkable achievement is a testament to the confidence of both buyers and sellers in the current market conditions.

Supply Shortfall and Strong Demand Drive Price Growth

PropTrack senior economist Eleanor Creagh attributes this strong performance to a combination of factors, including a housing supply shortfall matched by robust demand, which is outweighing the impacts of higher borrowing costs and stretched affordability. "Ongoing home price rises are likely incentivising many to overcome affordability challenges and transact with the expectation of continued growth," Ms Creagh said. "As a result, home prices have remained resilient to the higher interest rate environment."

Listings volume Core Logic May 2024 2

Across the country, home values reached record highs in May, with prices up 6.7% over the past year and some property hotspots experiencing growth of up to 20%. Perth has been the standout performer among capital cities, with dwelling values soaring 20.6% over the past 12 months.

Brisbane now shares the title of the second-priciest capital city, while several regional cities, particularly in Western Australia and Queensland, have also seen impressive double-digit price growth.

Homeowners Re-enter the Market as Confidence Grows

As property prices continue to climb, homeowners who had previously put their purchasing plans on hold appear to be re-entering the market, signalling a potential surge in activity in the coming months. A recent survey from Mortgage Choice found that 57% of prospective buyers had delayed their decision to buy until 2024, with brokers reporting a sense of 'cautious optimism' from customers motivated to act on their property plans.

This renewed interest in the housing market is further supported by ABS data, which shows a sharp increase in home lending. The value of owner-occupier home loans has risen by 19% compared to a year ago, while investor lending has surged by an impressive 36% year-on-year. Although the number of first-home buyer loans remains below the pandemic peak, they have been trending higher this year as more people look to escape the tight rental market.

Market Trends and Insights from CoreLogic

Interestingly, lower quartile dwelling values have been rising at more than twice the pace of upper quartile values, indicating that growth conditions continue to be skewed toward the more affordable section of the market. This trend may offer some hope for first-home buyers looking to enter the market at a more accessible price point.

New Listings on the Rise, but Overall Stock Remains Tight

Listings volume Core Logic May 2024
Listings volume Core Logic May 2024 1

New listings are trending higher than the historic five-year average and higher than this time last year, driven by above-average vendor activity in Sydney and Melbourne in particular. Despite this increase in new listings, overall listing levels have remained relatively subdued due to a strong rate of absorption from sales. Victoria stands out as having significantly higher total listings than this time last year among the states and territories.

The national median time on market remained steady at 31 days in the three months to May, compared to the same period last year. However, beneath the relatively stable national figures, there are some notable regional variations. In Perth, days on market dropped to just 10 days (from 15 days this time last year), indicating a highly competitive market. On the other hand, homes are taking longer to sell in Sydney, Melbourne, and Hobart, suggesting slightly weaker selling conditions in these cities.

While affordability remains a concern, particularly for first-home buyers, there are still opportunities for those willing to adapt their expectations and employ strategic approaches to enter the market. As we move further into 2024, it will be interesting to observe how the market continues to evolve and whether the current growth trends persist in the face of ongoing economic pressures.