Home values across the country losing momentum

Through the month of July, national prices grew 0.08 per cent, according to PropTrack’s latest Home Price Index. While this is 6.3 per cent higher than a year ago, July reportedly experienced the slowest growth this year.

Meanwhile, regional house prices experienced the first monthly drop since late 2022. City values, however, saw an increase of 6.6 per cent over the year.

Driving this growth was Perth, seeing a shocking 22.8 per cent in annual growth. Melbourne, on the other hand, recorded the fourth consecutive month of home value dips, placing the annual drop at 1.5 per cent.

Three capital cities in total saw a drop in prices over the month of July. Melbourne fell 0.21 per cent, Darwin dropped 0.15 per cent, and Hobart fell 0.04 per cent.

PropTrack’s senior economist, Paul Ryan, commented on the trends: “National home price growth persisted in July, albeit at a slower pace given the seasonally quieter time of the year.”

“Price conditions across the country remain diverse. Melbourne has posted further price falls, and regional markets saw the first price drop since 2022. By contrast, Perth, Adelaide, and Brisbane carried on posting strong price increases, with growth in Sydney persistently defying affordability pressures.

“Strong housing demand pushed prices higher, despite more homes being listed in what is a higher interest rate environment. Slow construction activity, above-average income growth, and July’s tax cuts are clearly contributing,” Ryan said.

While growth is expected to continue across the country, the building momentum experienced in recent years is predicted to slow.

“Further home price growth is expected over the coming months as the market moves into the traditionally busier spring selling season. However, the pace of price growth is likely to remain modest as uncertainty about the path of interest rates and affordability challenges constrain buyers’ budgets,” Ryan said.

These figures mirror those of CoreLogic, which released its Home Value Index alongside PropTrack’s data.

In this set, CoreLogic revealed home prices grew 0.5 per cent nationally in July, making it the 18^th consecutive month of home price increases across the country.

However, similarly, the report detailed a cool-down in accelerated growth, with the same cities of Melbourne, Darwin, and Hobart seeing a decline of 0.4 per cent, 0.2 per cent, and 0.5 per cent, respectively.

There are a variety of factors contributing to the varied statistics in each city. According to CoreLogic research director Tim Lawless, supply is a major one.

“The number of homes for sale in Brisbane, Adelaide, and Perth is more than 30 per cent below average for this time of the year, while weaker markets like Melbourne and Hobart are recording advertised supply well above-average levels.

“Most cities now have a median house value that is at least 1.5 times higher than the median unit value. With stretched housing affordability, lower borrowing capacity, and a lift in both investor and first home buyer activity, it’s not surprising to see the unit sector outperforming for a change,” Lawless said.

While some cities are thriving and others feeling the pinch, one positive to come from it all is decreased construction costs, said Lawless.

“On the positive side, we are now seeing residential construction costs rising at the slowest annual pace in 22 years. Although the cost to build isn’t reducing, the slower pace of growth should provide builders some confidence that project costs won’t blow out. Additionally, with established housing values rising almost three and half times faster than construction costs, profit margins should gradually repair,” he said.

Investors are reportedly taking up large chunks of the supply. The number of investor loans are up 24.8 per cent from last year and the value of lending to investors has climbed 29.5 per cent. Western Australia is driving much of this data, with home values up 23.9 per cent over the year and investor lending is up 53 per cent, more than double the national average.

“Investor demand tends to seek out capital growth, so it’s no surprise to see such an upswing in markets like Western Australia and Queensland where values are rising rapidly and yields tend to be higher than the larger capitals,” Lawless said.

“However, the share of investment demand is well above average at a time when rental yields are tracking substantially lower than mortgage rates, implying a rising number of investors are likely to be experiencing a cash flow loss, especially if they are highly leveraged.”

[Related: Has housing price growth plateaued?]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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