Price growth across Australia stalls: some cities drop in house prices, others still rising
After nearly two years of rapid gains, the pace of growth in the Australian housing market is finally slowing significantly, and house prices are falling in Melbourne and Canberra.
Domain’s quarterly House Price Report, released on Tuesday, shows house prices nationally posted their weakest growth since March 2023.
“The overarching narrative for the quarter reflects a slowdown in the aggressive price increases witnessed over the past two years, a trend evident across most cities,” says Domain chief of research and economics Dr Nicola Powell. “That momentum loss means the breaks are on.
“This deceleration can be attributed to affordability constraints. As prices continue to climb, the buyer pool becomes increasingly limited. As purchasing power diminishes, buyers find it more challenging to remain competitive, leading to a further slowdown in activity.”
But the weak outcome has not yet equated to falling prices in most capital cities. While the rate of house price growth has weakened, many cities have still hit new price records and the national median house price is now $1,155,683.
In Sydney, house prices rose by just 0.6 per cent over the past three months, but even that added $9000 to the city’s median, which is now at a record high of $1,654,668.
Adelaide house prices rose for a seventh consecutive quarter, up 4.2 per cent (or $39,000) to $973,336, edging the city closer to the $1 million milestone.
Hobart and Darwin had the highest pace of growth, up 4.9 per cent ($33,000) to $709,945 and 4.6 per cent ($26,000) to $592,976, respectively. They were the only cities to experience an acceleration in price growth, but they are still struggling to enter a recovery phase.
Perth was up 3.1 per cent ($27,000) to $894,842 and Brisbane grew 1.5 per cent ($15,000) to $994,945, putting it $5000 away from becoming a $1 million market.
“We have a multi-speed market,” Powell says. “We’ve got Adelaide, Perth, Brisbane stronger than other capital cities, and we’re likely to continue to see that multi-speed market [continue] because we’ve got different dynamics in our different capital cities.”
Meanwhile, Canberra slipped 1.2 per cent ($14,000) to $1,081,227, and Melbourne fell for a third consecutive quarter by 1.5 per cent (or $16,000) to $1,024,243.
“Canberra and Melbourne are the two markets that have just really failed to move into an established recovery,” Powell says.
“I don’t think we’ll see Canberra’s price dip below $1 million. I think it’s much more likely that Melbourne will achieve that than Canberra. But we would need to see another two or three quarters of price falls to see that occur [in Melbourne].”
Despite a slowdown in price growth, prices are still going up. Adelaide and Brisbane are predicted to become $1 million markets by the end of the year, putting them on par with Melbourne and Canberra.
“It’s a huge milestone,” Powell says. “It is a psychological milestone for buyers when you are staring at a $1 million overall median house price for a city.
“We have to remember Adelaide, in particular, was always seen as that much more affordable housing market. How can we say that about Adelaide when it could reach $1 million by the end of this year?
“The price point for Adelaide and Brisbane has changed.”
For those looking to buy apartments, the slowdown in price gains was less than for houses, but unit prices outperformed house prices over the quarter, narrowing the gap between property types.
Sydney and Melbourne’s unit prices had moderate quarterly increases. These were enough for Sydney to achieve a full recovery of its 2021 peak, but Brisbane has now replaced Melbourne as the second most expensive city in which to buy a unit. Adelaide is now the fifth most expensive city for units – for the first time in 20 years.
While prices have slowed down, the Australian property market continues to be as expensive as ever.
“We’ve still got many cities at record height,” Powell says. “Prices are still rising; they’re just not rising as fast.”
Brisbane is just $5000 shy from becoming a $1 million market, and Lauren Jones, a Brisbane-based buyers agent, expects it will happen by the end of the month.
“The world’s now watching Brisbane,” she says. “Everyone wants to come here. People used to come to Brisbane because it was cheap and the weather was good, but now people come to Brisbane because they want to be in Brisbane.”
In the past five years, property prices in Brisbane have essentially doubled, but it’s unlikely that the city will experience that same trend in the next five years, Jones says.
“We’re starting to see some of the generational wealth created in Brisbane spreading through the market,” she says. “A lot of families or parents who have made a lot of equity in Brisbane’s recent boom are starting to give that money to their kids to then go and purchase.”
Adelaide is $26,664 away from becoming a $1 million market, and Powell says the city is on track to hit its milestone by the end of the year with its slower pace of growth.
“Annual gains are still rising – which bucks the national slowdown – and are now the second steepest across all capital city markets, second only to Perth,” she says.
In Canberra, house and unit prices stumbled, but real estate agent Tim McInnes of Timothy Road believes this trend won’t last long.
“In terms of spring, you find that there’s more competition,” he says. “There’s a bit more on the market this time of year, and more stock leads to more options for people.”
The Canberra market still has a strong pool of buyers, but many of them are waiting for interest rates to drop, and when they do, McInnes predicts that will create urgency and lead to more price growth.
“If there is a fear that the market will go up, they’ll be out and about,” he says. “[The Canberra market] can flip pretty quickly.”
In Melbourne, prices are slipping, but John Bongiorno of Marshall White does not believe it will cause the city to lose its $1 million median.
“We are still being propped up by population growth and immigration,” he says.
“The property market in Melbourne has been absolutely affected by the state government’s relentless targeting of taxes on the property market. And I think in general people fear – from an investment point of view – the state government taxes, particularly land tax.”
For the Melbourne market to revitalise, there needs to be more buyer confidence created by the government, and that will come from more cooperation from the state government to help with the housing crisis, Bongiorno says.
Powell says Melbourne is the weakest capital city. “It’s been the city that’s underperformed the most in terms of price growth [if you] you compare back to March 2020, but I do think that there is this element that we’ve got this value building in Melbourne over time,” she says.
“It is highly unusual for a city like Melbourne to have pretty much done nothing over the last couple of years.”
Sydney’s dampening price growth results from interest rates finally “biting” and a growing concern about the overall economic environment, says local agent Ewan Morton of Morton.
“Those two things are making people more cautious and conservative,” he says. “There’s also been an increase in stock, so there’s more for buyers to choose from. And I think that’s making people feel that they’re in a stronger position.”
However, Morton believes the Sydney market is simply returning to normality and will not slip in price like Melbourne.
“It’s a normal market where people can transact with confidence,” he says. “The days of every property being more expensive than the last week – we’re not having that at the moment.”
Meanwhile, Perth lost momentum for the first time in this price growth cycle, but continues to have the strongest annual gains among the capital cities, with an impressive 25.3 per cent growth.
“Perth’s housing market continues to stand out nationally,” Powell says. “[And] Perth leads all capital cities in annual unit price growth, marking the steepest increase since March 2007.”
Now, Darwin sits alone as the only market under $600,000 and continues to keep its title as the cheapest capital city in which to buy a house.
Despite a quarterly price growth of $26,000, the city’s median price is still $86,000 below its 2023 peak, and still lower than this time last year.
“In contrast, the median unit price continued to decline for the third consecutive quarter, dropping by 7.1 per cent and contributing to a 9.7 per cent annual decline,” Powell says.
“As stock levels rise, clearance rates have softened to the lowest this year, properties are staying on the market longer, and price negotiations have become more common.
“Overall, the market appears to be shifting towards a buyers’ market, creating more favourable conditions for purchasing a home.”
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