Australia's Home Prices Drop For First Time In 2 Years

Australia's home prices dropped for the first time in nearly two years in December, as high mortgage rates made houses less affordable, with more people choosing to sell after a long period of rising prices.

According to property data firm CoreLogic, prices across the country dropped by 0.1% in December, while values in major cities fell by 0.2%, reported Reuters.

In Sydney, prices decreased by 0.6%, and Melbourne saw a 0.7% decline. However, Brisbane, Perth, and Adelaide continued to see prices increase.

For the year 2024, property values rose by 4.9%, adding about AU$38,000 to the median home price. In Sydney, the median price now stands at AU$1.2 million.

The price growth between February 2023 and October 2024 came as a surprise, given the challenges of borrowing and the rising cost of living, according to research director at CoreLogic, Tim Lawless, The Guardian reported.

"This result represents the housing market catching up with the reality of market dynamics," he said.

Even mid-sized cities, which had seen strong price increases, are starting to slow down.

In December, Perth saw the largest price gain, with a 0.7% rise, bringing its annual growth to an impressive 19.1%. Adelaide's market grew by 0.6%, and Brisbane saw a 0.5% increase. Darwin also showed a slight improvement of 0.4%, following a weaker year.

The total value of land and housing owned by households grew by AU$851 billion over the year to September, reaching AU$11.3 trillion.

Despite interest rates peaking at a 12-year high of 4.35% in late 2023, the housing market has remained surprisingly resilient.

After a slight downturn in 2022, when the Reserve Bank of Australia (RBA) first raised interest rates, home prices began to rise again, despite efforts to control inflation and keep cash rates high.

The RBA has hinted at a rate cut in February, but markets expect only a modest decrease to around 3.60% in 2025.

"It will take a lot more than three or four rate cuts to get interest rates back to the pre-pandemic decade average of 2.55%," Lawless stated. "So we don't expect lower rates to be the catalyst for a renewed phase of strong value growth."

Regional markets performed better than urban areas, with prices rising by 0.2% in December and 6% over the year.

According to CoreLogic, while rate cuts could boost housing demand in 2025, a sharp rise in prices is not expected.