Steam comes out of the market as Australian property values cool
Stubborn inflation and just-out-of-reach interest rate cuts are the likely reasons for the softer end to the year, new data has revealed
2 min
Australian capitals experienced their smallest rise in home values since January 2023, new data from CoreLogic has revealed.
The property data provider’s Home Value Index showed values rose by 0.1 percent over spring after 22 months of consecutive rises. CoreLogic predicted this could be close to the last rise in this cycle, with both the Sydney and Melbourne markets showing signs of cooling.
“The downturn is gathering momentum in Melbourne and Sydney,” said Tim Lawless, CoreLogic’s research director.“While the mid-sized capitals, which have dominated the growth cycle of late, are also losing steam.”
The trend was most obvious in Melbourne, with housing values recording drops in 10 of the past 12 months. Melbourne values fell by -1.0 percent in November, while Sydney experienced a fall of -0.5 percent. The report indicated that Sydney values had most likely peaked in August this year.
Some of the smaller capitals were also showing signs of a weakening in values, with Darwin down -0.7 percent and Canberra recording a drop of -0.3 percent.
“The mid-sized capitals and most of the regional ‘rest of state’ markets continue to provide some support for growth in the national index, but it is clear momentum is also leaving these markets,” added Mr Lawless.
However, it was a different story on the other side of the country, with Perth home values experiencing further growth. CoreLogic data showed values in the Western Australian capital up 1.1 percent over the month and 3.0 percent over the quarter. While the increases in values were the strongest amongst the capitals, CoreLogic noted that they were less than half that recorded in the June quarter, where they were at a robust 6.7 percent.
Mr Lawless pointed to a lack of movement in core inflation, as well as the diminishing likelihood of an interest rate cut early next year as factors in the subdued capital gains. Leading Australian economists are predicting a cut somewhere between February and May 2025.
“A lower cash rate will be a positive factor for housing markets,” Mr Lawless said. “Lower mortgage rates will provide a lift to borrowing capacity, and, along with lower inflation, should see an improvement in serviceability assessments and see a further rise in consumer sentiment.”
“A couple of rate cuts might be enough to shore up a declining trend in home values, but it is hard to see any material upward pressure returning until interest rates reduce more substantially and affordability barriers are less formidable.”
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Australia’s housing affordability crisis is being fuelled by chronic undersupply, planning delays and rising development costs, as politicians continue to focus on the wrong solutions.
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Australia’s housing crisis will not be solved by first-home buyer incentives or tax changes alone, with leading property figures warning governments must tackle supply constraints if affordability is to improve.
Speaking at the Kanebridge Quarterly Property Leadership Summit in Sydney last week, expert project marketing specialist Sam Elbanna, property investor and fund manager Paul Miron and property consultant Karla McNeice said that a lack of housing supply remained the central issue facing the market.
Elbanna, Director of CPM Realty with more than 30 years’ experience in project sales, argued that successive governments had focused too heavily on stimulating demand rather than addressing the barriers preventing new housing from being delivered.
“The misconception is that politicians think the way to solve the housing crisis is to drive demand,” he said.
“The reality is that’s not the way. This is a supply-side problem, and it needs to be solved on the supply side.”
Drawing on his experience in project sales, Elbanna said policies designed to help first-home buyers often had unintended consequences, pointing to previous grants that ultimately flowed through to higher property prices.
Instead, he said developers were facing increasing red tape, approval delays and rising costs, which were discouraging new housing supply.
“In the absence of stock, demand exceeds supply,” he said.
Miron, a Co-Founder and Fund Manager of Msquared Capital, said the housing debate had become overly focused on tax policy while overlooking broader structural issues.
He argued that affordability challenges stemmed from a combination of factors, including planning constraints, supply shortages, migration levels and interest rates.
“No-one can be 100 per cent certain on the real reason for property prices is going up,” he said.
“The reason why property prices are higher is a combination of interest rates, lack of supply, migration, vacancy rates and maybe taxes play a role.”
Miron was critical of recent federal housing policy changes, warning they could reduce the number of new homes being built and further constrain supply that was even highlighted in the budget.
He also highlighted the importance of the property sector to the broader economy, noting that residential real estate and related industries employed more than one million Australians.
McNeice, who advises developers on sales strategy and market intelligence, said understanding buyers had become increasingly important as affordability pressures intensified.
While affordability remained a major consideration, she said today’s buyers were focused on value rather than simply price.
“People are looking for value for money,” she said.
She said buyers were increasingly evaluating factors such as transport connections, walkability, nearby amenities and flexible living spaces that could accommodate changing family needs.
“What infrastructure is going on? Can I walk to the shops? Can I meet people at the local cafe?” she said.
The panel also discussed the mounting pressures facing developers, with Elbanna arguing that many projects become financially unviable from the moment a site is purchased.
“The viability of a development happens at the moment the site is bought,” he said.
He said rising construction costs, higher interest rates and overly optimistic feasibility assumptions had left some developers exposed as market conditions changed.
While acknowledging the growing number of smaller and first-time developers entering the market, Elbanna said property development required expertise across finance, construction, marketing and legal disciplines.
“It is actually a business that requires a level of expertise,” he said.
Looking ahead, the panel agreed opportunities remained in the market despite current challenges.
Miron said property should continue to be viewed as a long-term investment and cautioned against trying to time short-term market movements.
McNeice said success would increasingly depend on identifying projects that genuinely met changing buyer expectations.
Elbanna said affordable housing remained achievable, but developers needed to deliver more than just homes.
“We can provide affordable housing in this country,” he said.
“But we’ve got to wrap that affordable housing with the things that people want.”
As Australia’s housing affordability debate intensifies, the panellists agreed on one point: without a meaningful increase in housing supply, demand-side measures alone are unlikely to solve the nation’s property challenges.
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