The latest data confirms it’s never been more expensive to buy a home in Australia, with rising demand and shrinking supply pushing prices to new highs.
The PropTrack Home Price Index shows home prices reached a record high in July, rising 0.3% last month and 4.9% over the year.
A median-priced Australian house now costs $915,000, while a unit is worth $678,000 the data shows.
Prices are even higher in the capitals, with the median house value rising to $1.082 million and the unit value sitting just shy of $700,000.
But even though prices have never been higher, last month’s increase was the smallest this year, according to REA group senior economist Anne Flaherty.
“In part, this may have been due to the Reserve Bank’s surprise decision to keep interest rates on hold in July, despite the market widely expecting a cut,” she said.
Adelaide had the strongest home price growth in July, and in the past year. This house in Malvern in Adelaide’s south recently sold for $3.5 million. Picture: realestate.com.au
The RBA last month opted to delay cutting rates until more evidence showed inflation was sustainably declining.
That evidence came in the form of fresh consumer price index data from the Australian Bureau of Statistics this week, with the lowest inflation result since December 2021 strengthening the case for a rate cut when the RBA board next meets in two weeks’ time.
“This increases the chance of an interest rate cut in August, with more forecasters expecting at least one more rate cut before the end of the year,” Ms Flaherty said
FOMO rising as demand strengthens
The increase in home prices in July came amid a seasonal decline in the number of homes for sale and an increase in buyer demand, Ms Flaherty said.
“While the number of homes for sale has slowed over winter, buyer demand remains strong and auction clearance rates are sitting at the highest level in over two years,” she said.
Auction clearance rates are high, suggesting prices could rise further. Picture: Jeremy Piper
“Searches to buy homes on realestate.com.au are also sitting higher compared to a year ago – a good indicator of upcoming demand.”
“There is also growing evidence of a ‘fear of missing out’ (FOMO) among buyers.”
“According to the Westpac-Melbourne Institute’s July Consumer Sentiment Index, three quarters of consumers surveyed expect home prices to rise over the next 12 months.”
How home prices changed around Australia in July
Adelaide (up 9.4% in the past year), Brisbane (up 9%) and Perth (up 7.9%) remain the strongest capital city housing markets, even though rates of growth have slowed from the rapid pace recorded last year.
Unit price growth in these cities has significantly outperformed that of houses – partly a result of the rapid increase in house values making units the more affordable option.
Unit price growth is outpacing that of houses in Brisbane, Perth, Darwin and Hobart. Picture: Getty
Brisbane’s median unit price is now about $82,000 higher than a year ago after a 13% lift in values – the fastest growth recorded among the capitals. House prices grew by about $77,000, representing a slower increase of 7.8%.
It was a similar situation in Perth, with unit values growing 11.4%, while house prices rose 7.3%.
The difference between house and unit prices has grown over the past year in all capitals except Canberra and Hobart, with units now offering an even greater discount compared to houses.
Affordable regions outperform
In contrast to the smaller capitals, Sydney and Melbourne have recorded slower growth recently.
Sydney home values rose just 0.1% in July, and 3.3% in the 12 months, while Melbourne recorded a 0.2% increase for the month and 1.5% for the year.
However, Sydney’s strongest growth was in the city’s more affordable regions, with house prices in South West Sydney up almost 10% in the past year, equating to a gain of more than $100,000.
This Cabramatta West house sold for $1.46 million in July. Values across Sydney’s south west are up 9.5% in the past year. Picture: realestate.com.au/sold
Laing+Simmons Cabramatta director Sonny Tran said investors were becoming increasingly active, representing about half of buyers currently active in the area.
“It started a couple of months ago when interest rates started coming down,” he said. “It’s pushed the market up.”
“They are sensing there’s going to be another rate cut soon.”
Meanwhile, Darwin has recorded stronger price growth recently, spurred by increased investor interest in affordable high-yielding rentals amid a decline in homes on the market.
Darwin house prices are up 6.5% in the past year and unit prices are up 7.4%, although growth in July was modest.
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Hobart was the second-strongest capital city market in July after Adelaide, with prices up 0.5%.
The city’s unit price growth of 2% was a standout, and comes amid a reduction in the time it takes to sell a property in the Tasmanian capital – a sign of strengthening demand preceding further price rises.
Property prices in Hobart are on the way up, with unit price growth particularly strong in July. Picture: Getty
“Stock levels are ridiculously low and the buyers haven’t dried up,” said Hobart real estate agent Nina Schubert of Insitu Property.
“Most properties we’re presenting to the market are getting three offers within a week. Most are between 5% and 10% over the asking price.”
“There’s a huge amount of first-home buyers in the market at the moment, with some great incentives for them.”
Regional Queensland tops the charts
Home prices have grown faster in the regions recently, with values up 6.5% in 12 months compared to 4.3% in the capitals.
While regional South Australia recorded the strongest growth at 12.5%, price growth in parts of regional Queensland has been exceptionally strong, Ms Flaherty said.
“Six of the top ten best performing regions over the past 12 months can be found in Queensland, with Townsville taking the crown at 16.7% growth,” she said.
“Townsville’s outperformance comes off the back of high buyer demand from both owner occupiers and investors.”
“Supporting demand has been a strong local economy, population growth, and a shortage of housing, particularly rentals.”
Looking ahead, Ms Flaherty said lower interest rates would improve borrowing capacities and add to price growth momentum, but poor affordability would keep growth in check.