Australia’s Multi-Speed Property Market

The Australian property market is displaying significant regional variations, with dramatic differences in price changes across capital cities and regions over the past year. From May 2023 to May 2024, median home values have seen varied growth:

• Perth: +22%
• Brisbane: +16.3%
• Adelaide: +14.4%
• Sydney: +7.4%
• Darwin: +3.5%
• Canberra: +2%
• Melbourne: +1.8%
• Hobart: -0.1%

The regional markets also show a range of changes:

• Western Australia: +14.8%
• Queensland: +11.8%
• South Australia: +10.6%
• NSW: +4.3%
• Tasmania: +0.4%
• Victoria: -0.6%

Key Drivers of Market Divergence

Interest Rates: Expensive city markets like Sydney felt the impact of interest rate hikes earlier than more affordable markets. This led to a decline in Sydney home values shortly after the initial rate rise in May 2022, while markets like Adelaide continued to grow.

Market Cycles: Cities such as Hobart, Canberra, Sydney, and Melbourne experienced downturns as rates increased, following periods of significant price growth. Conversely, Perth’s current boom is seen as a long-overdue catch-up after a protracted downturn post-mining boom.

Supply and Demand: High demand combined with limited supply is pushing up prices in markets like Perth, Brisbane, and Adelaide. These cities have stock levels well below their five-year averages. Meanwhile, Hobart and Melbourne have seen an increase in available stock, contributing to weaker price growth.

Impact of Migration and Employment

Interstate Migration: The pandemic prompted many to move from Sydney and Melbourne to more affordable markets like South-East Queensland and Western Australia, boosting demand and prices in these regions.

Overseas Migration: Record-high overseas migration in 2023 significantly impacted rental markets, particularly in NSW and Victoria, where rent increases outpaced property value growth.

Employment: Strong employment growth in Western Australia and Queensland has also driven demand, as people move to these states in search of jobs and affordable homes.

Affordability Insights

Despite high growth, Perth, Brisbane, and Adelaide remain more affordable compared to Sydney, Canberra, and Melbourne:

• Perth: $770,000
• Brisbane: $940,000
• Adelaide: $810,000
• Sydney: $1.45 million
• Canberra: $960,000
• Melbourne: $940,000

Higher interest rates have made cheaper markets attractive to families seeking lifestyle changes and investors looking for better financial opportunities.

Market Outlook

CoreLogic predicts that the gap in price growth between different markets will persist due to strong fundamentals in Perth and ongoing oversupply in Melbourne and Hobart. However, the cyclical nature of the property market suggests that weaker markets will eventually see renewed interest and price increases.

A Glimmer of Hope for Buyers

Fewer bidders at auctions in Sydney and Melbourne signal a slightly more accessible market for buyers. Auction listings have increased, diluting the buyer pool and providing more opportunities for prospective homeowners.

Conclusion

While the market remains complex and varied, understanding the factors driving these changes can help buyers make informed decisions.