The pace of growth in national home values is now its slowest since August 2023 as three state capitals come off the boil after achieving stellar price performances in the past 18 months.
Values increased 0.5% in May and rose 1.7% in the first five months of the year, according to the Home Value Index conducted by Cotality (formerly CoreLogic).
With Perth, Adelaide and Brisbane now seeing their incredible spikes in value level off, all state capitals are starting to form a solid pack without any stand-out performers.
That may not last for long.
The Domain “Price Forecast Report” suggests Sydney and Melbourne will regain their positions as the leaders in Australia’s property market.
Property portal Domain predicts Sydney will see prices rise 7% in the next 12 months as the market finds momentum on the back of recent interest rate cuts, and the promise of more to come.
Domain believes Sydney homes will rise by an average $112,000 and the average price could be a staggering $1.8 million.
Melbourne is set for a 6% rise over the next year, which would put its average price at $1.1 million. For the past two years, the Victorian capital has been languishing and still remains in negative territory.
By contrast, Brisbane (+5%), Adelaide (+4%) and Perth (+5%) will fall back into the pack. Domain also believes Canberra will achieve growth of 4%.
Cotality agrees that capital city values are already converging.
The gap between the highest and lowest annual changes is 9.8%, it says.
The gap in the annual growth range peaked last August at 26.1%. That’s when Perth boasted a 24.5% annual growth rate and Hobart hobbled along at -1.6%.
The data from Cotality and Domain demonstrate how the market mood can change quickly due to a range of issues, such as economic confidence, interest rates and even geopolitical concerns over tariffs or even conflict.
Today, only Melbourne (-1.2%) and Canberra (-0.7%) have recorded annual declines in dwelling values in the past 12 months, according to Cotality. Hobart is back in positive territory at 1% annual growth.
Cotality says the growth in values is being created at the cheaper end of the market, where first homebuyers and investors are battling each other for the most affordable housing.
However, Cotality believes values for the “more expensive market segments” will start to accelerate off the back of rate cuts.
The Reserve Bank of Australia recently reduced its cash rate to 3.85%. The rate had stalled at 4.35% from November 2023 until last February 19 when it dropped to 4.1%.