Gravity-defying home prices finally coming down

Australia: The property market is finally cooling off after a long stretch of rising prices. It’s been a wild ride, but now we’re seeing some real changes.

For the first time in almost two years, CoreLogic reported a drop in national home values. December saw a tiny 0.1% decline, following a flat November. It looks like the market is finally catching up with reality.

Tim Lawless, the research director at CoreLogic, wasn’t shocked by this dip. He mentioned that the housing market is just adjusting to the current situation. After a bit of a downturn in 2022, home prices started climbing again, even with high interest rates and inflation hanging around.

It’s surprising how prices kept rising from February to October 2024, especially with people struggling to borrow money and deal with living costs. Even the mid-sized capitals, which were booming, are starting to slow down.

Perth had the biggest jump in December, with a 0.7% increase, making it 19.1% higher than last year. Adelaide and Brisbane also saw some growth, while Darwin managed a small gain after a tough year.

Lawless pointed out that with affordability issues and less borrowing power, buyers are now looking at cheaper markets, which is helping those areas grow.

On the flip side, Sydney and Melbourne both saw declines, with Sydney down 0.6% and Melbourne 0.7%. Rent prices are also starting to level off, which is good news for renters.

In Victoria’s biggest city, dwelling values are down 3% annually. Regional markets are doing a bit better, with a slight increase over the month and a 6% rise annually.

Looking ahead, if interest rates drop in 2025, it might boost housing demand, but CoreLogic doesn’t expect another big surge in prices.

For renters, the 4.8% rise in rents over the year is the smallest increase since March 2021. Even though rents are stabilizing as migration returns to normal, they’re still growing faster than pre-pandemic levels.