A new record: Sydney’s median house price rose to a new high of $1.65 million in the September quarter. Getty
Australia’s housing market is on the cusp of another boom that will push prices even higher than Sydney’s new median house price record of $1,654,668 when rate cuts next year give potential buyers more funds to compete for properties, data provider Domain says.
House and unit prices in Sydney, Brisbane, Adelaide, and Perth hit new records in the September quarter as sentiment improved among consumers that borrowing costs had stabilised and the next move would be down, Domain chief economist and research head Nicola Powell said.
But even though momentum in the east coast-dominated market was now slowing, once the Reserve Bank of Australia began cutting rates, consumer confidence, buying activity – and prices – would pick up again, Dr Powell told The Australian Financial Review.
“The high cash rate is helping temper the pace of price growth,” she said. “What’s going to happen when we see the cash rate being cut and Australians feel more confident that inflation is tamed? That will boost sentiment. When you get more positive sentiment, you get a greater rate of price growth.”
The figures and outlook from Domain – majority owned by Nine, publisher of the Financial Review – show that the post-pandemic surge in borrowing costs has only dented, and not fundamentally changed, conditions in Australia’s largely unaffordable housing market.
More homes are coming on the market, with 3076 up for auction last week – only the second time this year the weekly number of auctions topped 3000 – and a national preliminary clearance rate that CoreLogic said slipped to 66.8 per cent, indicating a weakening market.
Economist Louis Christopher and NSW valuer-general Sally Dale both predict housing prices in the country’s largest state to have turned negative by year-end.
The rate of gain in Australia’s most buoyant housing markets generally slowed in the September quarter from June. But even without a cut in borrowing costs, Sydney’s median house price rose 0.6 per cent to its new $1.65 million high and the median unit value gained 0.9 per cent to $815,258.
Brisbane’s median house price jumped 1.5 per cent to $994,945 from the June quarter and units 3.3 per cent to $610,321. Both marked new highs.
New records were also hit in Adelaide – where houses rose 4.2 per cent to $973,336 and units 3 per cent to $536,180 – and in Perth, where houses gained 3.1 per cent to $894,842 and units 0.9 per cent to $466,548.
But in markets that showed “lots of contradictions”, prices were hitting new highs even as overall housing supply picked up and conditions were turning in favour of buyers, Dr Powell said.
The central bank has not cut borrowing costs, but the federal government’s stage 3 tax cuts that came into effect from July 1 had given the same boost to household cash flow as a 50-basis-point loosening in the cash rate, she said.
The next rate-cutting cycle, which was likely to start at the end of March, would further increase the sums people could borrow to spend on housing and draw back in buyers who were still holding out for a cut, Dr Powell said.
“We are going to see borrowing capacity improve and mortgage affordability improve,” she told the Financial Review. “That will bring people to market next year and will likely spark greater housing turnover.”
Weakness or affordability?
Melbourne remains the exception to a buoyant national picture. The median house price in the Victorian capital fell 1.5 per cent over the September quarter to $1,024,243, leaving the figure down 6.3 per cent from its peak in September 2021, the Domain figures show.
That did help affordability, said Maiy Azize, a spokeswoman for affordable housing advocacy group Everybody’s Home.
“This is the outcome a lot of people say they want – when housing becomes more affordable, people get the opportunity to buy in,” Ms Azize told the Financial Review.
“The word of caution is that Melbourne is still an incredibly expensive place to live or buy. This focus on quarterly numbers can really obscure the experience of people who are trying to buy and still find it incredibly hard.”
This was creating opportunity in the city that had been the weakest performer, Dr Powell said.
“Value is building,” she said. “When the spark gets back for the Melbourne housing market, my expectation is Melbourne will overperform.”
AMP chief economist and head of investment strategy Shane Oliver agrees.
“Interest rates cuts are likely to provide a boost to property prices next year, assuming unemployment doesn’t rise too far, driving a renewed cyclical upswing,” Dr Oliver said earlier this month.
“This could see underperforming markets like Melbourne start to spring back relative to the booming but increasingly less-affordable property markets in Brisbane, Adelaide and Perth all of which are now more expensive than Melbourne.”
But even Melbourne – which CoreLogic in September said was overtaken by Adelaide and Perth in terms of housing price growth – is seeing a pick-up in apartment values.
The Victorian capital’s median unit price rose 0.5 per cent in the September quarter – after gaining 0.4 per cent in June – to a median value of $572,491, Domain said. Even so, Melbourne unit prices remain 4.8 per cent below their December 2021 peak, Domain said.
In contrast to house prices, Sydney unit price growth accelerated, picking up 0.9 per cent in the September quarter to a median $815,258, after a 0.1 per cent gain in June.
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