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CoreLogic’s annual Best of the Best report for 2024 has revealed that home sales increased 8 per cent on the previous year, as the housing market demonstrated “surprising resilience” in the wake of higher interest rates and global uncertainty.
According to CoreLogic, the total number of home sales hit 528,000 nationally in the 12 months to November, an increase of 6 per cent from the previous five-year average, while home values increased 5.5 per cent over the same time, with the combined national home value surpassing $11 trillion.
Head of research at CoreLogic, Eliza Owen, said the initial strength in the market over the year gradually diminished as a result of declining demand, elevated levels of advertised supply and a “shifting outlook for inflation and interest rates”.
Owen added that this trend was apparent in CoreLogic’s national home value index (HVI), showing a relatively flat 0.1 per cent increase in November.
“Beyond the market conditions, the key theme throughout the year was one of variability.”
Indeed, diversity in annual value changes was clear across the housing market, ranging from a fall of 2.3 per cent in Melbourne to a whopping 21 per cent increase in Perth.
The same can be said for Australia’s regional markets, where values fell 2.7 per cent in regional Victoria, and rose 15.5 per cent in regional Western Australia.
Owen continued: “However, even in high growth markets of Adelaide, Brisbane and Perth, there are distinct signs of a cyclical slowdown, with the quarterly pace of gains easing over the course of the year.
“Interestingly, the quarterly value decline across weaker capital city performers has shown marginal signs of easing toward the end of 2024. This could signal some stabilising of values in weaker markets through 2025, and a narrowing of the range in capital growth over the next 12 months.”
Speaking further on the outlook for 2025, Owen stated the start of the new year could likely see an ongoing drag on buyer demand seen in the later portion of 2024, which could manifest in a small decline in home values during the first part of the year.
Owen noted expectations for a “shallow” rate reduction cycle, with economic analysts across the major banks penciling in a cash rate of between 3.1 per cent and 3.6 per cent by the end of 2025.
“A change in the official cash rate target could then mark an inflection point, increasing demand in the second half of the year,” she said.
CoreLogic estimated that an affordable dwelling purchase for the median income household in Australia under the current average owner-occupier rate of 6.27 per cent would sit around $507,000, far lower than the current median of $813,000.
Moreover, in the event of average mortgage rates declining by 125 basis points, which assumes a cash rate of 3.1 per cent being passed on to mortgage rates in full, this only takes an affordable purchase price to $581,000, according to CoreLogic.
Owen further stated there are also tailwinds for households that could boost buyer and rental demand next year.
“Wages growth, while slowing, is well above the pre-COVID, decade average, at 3.5 per cent in the year to September.
“Real household income has been boosted by the Stage 3 tax cuts, despite this boost to income seemingly being saved by households for now. Real household income growth is expected to pick up further as inflation continues to ease in 2025.
“While market conditions are broadly expected to improve off the back of a cash rate reduction in 2025, there will still be considerable diversity in housing market performance.”
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