The PropTrack Home Price Index shows the home price upturn is firmly entrenched and prices hit fresh record highs in many markets in October.
National home prices reclaimed 2022’s price falls in their entirety last month, with the upswing continuing in October as national home prices climbed 0.36% month-on-month to set another record, bringing them up 4.93% so far this year.
With the spring selling season in full swing market activity ramped up in October. Buyer and seller confidence is buoyant, and choice has improved significantly in the major capitals. Although the flow of new listings hitting the market has risen, the demand for housing has remained strong and home prices continued to move higher with the upturn firmly entrenched.
October marked the tenth consecutive month of national home price growth. After falling 4.04% from March 2022 to December 2022 national prices are now up 4.93% from the low point recorded in December having reclaimed a fresh record high, and are now 4.54% above their levels a year ago.
National home prices increased 0.36% in October, marking their tenth consecutive increase, the longest period of consecutive monthly growth since the pandemic boom, which saw 23 consecutive months of growth from May 2020 to March 2022.
This continued lift means prices nationally have grown 4.93% since their low point in December 2022, reversing the fast falls seen in 2022 in entirety last month, to now sit 0.69% above their previous peak recorded in March 2022 and 4.54% above their year ago levels.
While interest rates were the primary driver of home price falls seen for much of 2022, there are other factors like labour market conditions, the rate of immigration, home building, the supply of properties for sale, state of rental markets and interstate and regional migration that all also affect home price growth, as well as how it is distributed across the country.
Strong demand stemming from the rebound in net overseas migration, tight rental markets and limited housing stock have offset the impacts of substantial rate rises and the slowing economy.
In the first half of this year stronger housing demand and a limited availability of properties listed for sale underpinned the initial phase of the home price turnaround and subsequent recovery.
Although the volume of new listings hitting the market has increased in recent months the combination of strong population growth and challenged rental markets have proved a potent one.
At the same time, dwelling approvals have declined and the sharp rise in construction costs, compounded by costly delays arising from labour and materials shortages, has slowed the completion of new homes.
Resilient conditions in the labour market with slowly increasing wages growth and the unemployment rate holding close to multi-decade lows are also a contributor to demand.
In Sydney and Melbourne increasing confidence amongst sellers has seen the flow of new listings surge, improving choice for buyers. Despite the uplift in the number of properties coming to market, home prices moved higher in October, with the uptrend now firmly entrenched as strong demand and positive sentiment see prices continue to lift.
Choice for buyers remains limited in Brisbane, Adelaide, and Perth, heightening competition and seeing prices hit fresh peaks in each of these markets in October.
Capital city markets have led 2023’s price upturn while regional areas have seen slower growth. However, the pace of growth in regional markets has increased after lagging much of this year. In October, regional prices rose 0.32% to set a fresh record high.
Prices in the combined capital cities also set a fresh record high climbing 0.37% month-on-month. Capital city markets, with the exception of Brisbane and Darwin, outperformed their regional counterparts on a monthly basis in every state in October.
Prices in the capitals are up 5.95% year-to-date, compared to 2.43% for regional areas. Though capital city markets have taken the lead in 2023, prices held up better for much of last year in the regions. And regional areas also experienced exceptionally strong growth during the pandemic. Home prices in regional areas are still up 49.3% since March 2020, while home prices in the combined capitals are up 31.2% over the same period.
All capitals, except Darwin (-0.11%), saw prices rise in October. The smaller capital city markets recorded a stronger pace of growth over the month, led by Brisbane (+0.52%) and Perth (+0.52%).
Sydney home prices have fully reversed the 6.82% peak to trough decline seen in 2022 after increasing for eleven straight months. Prices increased a further 0.37% in October and prices are now 0.32% above their prior peak recorded in February 2022 and are up 7.71% from their low point recorded in November 2022 and up 7.62% year-to-date.
Despite the increase in the number of properties hitting the market, Melbourne home price growth accelerated in October, with prices climbing 0.28% month-on-month. This bring prices up 0.64% from their level a year ago. Even so, prices in Melbourne remain 3.90% below their peak in March 2022. Compared to their low point in January 2023, home prices are up 1.91%, meaning the price recovery in Melbourne is still lagging Sydney and Brisbane, but remains ahead of the recovery seen in Hobart and Canberra.
Home prices in Brisbane have already regained 2022’s price falls and are rising at a fast pace, jumping 0.52% in October to hit a new price peak. Prices are now 7.36% above their level a year ago and up 6.46% year-to-date after increasing for ten straight months, the longest stretch of growth since the 24 month upturn seen through the pandemic period.
Adelaide and Perth continue to be the strongest performing capital city markets over the past year, with prices up 8.77% and 10.90% respectively in both cities over the past year, and prices at fresh record highs in both markets. The relative affordability of both cities homes, population growth, and very tight rental markets are supporting home values, while low stock levels are intensifying competition amid strong buyer demand resulting in a sellers’ market with home prices in both capitals continuing to rise at a fast pace, even after bucking the falling price trend seen in most markets for much of last year.
Sydney follows as the third strongest capital city market when comparing annual growth with Sydney prices up 7.51% year-on-year in October 2023.
At the other end of the spectrum Hobart remains the weakest performing market when comparing annual price growth and change from peak, with prices down 6.71% from their March 2022 peak despite rising 0.51% in October. However, this comes after several years of outperformance as well as strong growth during the pandemic. Home prices in Hobart are still up 37.82% since March 2020.
Prices for detached houses nationally grew 0.3% in the month; unit prices grew 0.31%. House prices have grown more quickly over the past year and are now 4.55% higher than a year ago, while unit prices are up 4.48% on their year ago levels.
Markets in parts of SA, WA and Queensland continued to be the top-performing areas over the past year, recording growth in prices of 9% or more over the past year. These markets have largely avoided the downturn in prices, due to a combination of factors: more affordable homes, heightened interstate migration during the pandemic, and – particularly for Perth – very low stock on market. In Perth, the total number of properties currently listed for sale is at record lows.
In October the Sydney - Parramatta SA4 region was a new entrant to the list of highest growth regions over the past year, with prices 9.99% higher than a year ago.
Within Sydney, inner city areas have the strongest rebound in prices compared to a year ago; that reverses the pattern seen earlier in the downturn, when more-affordable peripheral areas were holding up better.
The story is fairly similar in Melbourne; however, prices in the inner Melbourne region have not performed as well as prices in the east, or, particularly, the inner east.
The 2023 price upturn is firmly entrenched and prices hit fresh record highs in many markets in October. Record levels of net overseas migration, a challenged rental market and limited housing stock are offsetting the impacts of substantial rate rises and the slowing economy with home prices continuing to lift.
Home prices fell at a fast pace in many markets in 2022 when interest rates were first rising, though those falls have now entirely reversed in many markets.
Earlier this year the turnaround in home prices was underpinned by the subdued listings environment that meant buyers were competing for fewer properties. However, although the volume of new listings hitting the market has increased in recent months, housing demand has remained strong, bolstered by the strength in net overseas migration, as well as very tight rental markets.
At the same time, the sharp rise in construction costs, compounded by costly delays arising from labour and materials shortages, has slowed the completion of new homes and limited housing supply relative to demand is continuing to offset the substantial interest rate tightening already delivered and deterioration in affordability.
Further, continued low unemployment, resilient labour market conditions and slowly increasing wages growth remain a contributor to the sustained strength in market conditions. Ten months of price rises that have gathered traction across markets alongside more positive market conditions are also likely to be drawing buyers off the sidelines.
In Sydney and Melbourne increasing confidence amongst sellers has seen the flow of new listings hitting the market surge, but strong home buying demand has absorbed the uplift in new stock for sale and seen prices continue to lift in October. Choice for buyers remains limited in Brisbane, Adelaide, and Perth, sustaining buyer competition and solid selling conditions with prices continuing to lift and hitting fresh peaks in each of these markets in October.
Looking ahead, although interest rates may rise further, they remain close to if not at their peak and while the outlook for the economy is weaker, population growth is set to continue rebounding strongly. Together with a shortage of new home builds and continued challenging conditions in the rental market, prices are expected to continue to rise despite affordability remaining stretched.
Further rate rises may be a headwind for pace of growth but are unlikely to deter continued gains with strong population growth, tight rental markets and a housing shortfall proving a potent combination fuelling further price rises.
Methodology: The PropTrack Home Price Index measures the monthly change in residential property prices across Australia to provide a current view on property market performance and trends. PropTrack Home Price Index uses a hybrid methodology combining repeat sales with hedonic regression. The repeat sales method matches resales of the same property while the hedonic regression estimates values based on the value of similar properties. The hybrid model allows two properties in the same Australian Bureau of Statistics Statistical Area 1 (SA1) region, of the same type, to be matched and controls for differences in property characteristics, as in a hedonic regression. The PropTrack Home Price Index is a revisionary index with the whole back history updated monthly with current transaction information.
** This report uses realestate.com.au internal data and data sourced from third parties, including State government agencies. It is current as at the time of publication. This report provides general information only and is not intended to constitute any advice and should not be relied upon as doing so. If you wish to cite or refer to this report (or any findings or data contained in it) in any publication, please refer to the report as the ’PropTrack Home Price Index Report – October 2023’. See report for Copyright and Legal Disclaimers.