The past 12 months has been a year of two halves for the Australian property market, with ongoing rate hikes and stretched affordability slowing growth since June.
CoreLogic’s Best of the Best report found that despite all the headwinds, property markets across the country showed just how resilient they are, ending the year with strong gains across most capital cities, thanks to surging immigration and tight supply.
CoreLogic Head of Research, Eliza Owen, tipped 2024 would see far more subdued capital growth, after price growth rapidly slowed down in the second half of 2023.
“Housing activity rebounded through early 2023 as buyers took advantage of lower prices, however towards the end of 2023 affordability constraints have become more pressing, skewing demand towards the middle-to-lower end of the pricing spectrum,” Ms Owen said.
“Certainly, lower-priced housing markets such as Perth, Brisbane and Adelaide saw very resilient conditions through the national downswing period, and strong annual growth through to the end of November.”
According to the report, affordable markets topped the list of strongest growth locations.
Perth claimed eight of the top 10 spots for the strongest growth in house values, with Brookdale, Armadale and Hilbert all up more than 30 per cent annually and median house values sub-$550,000.
While for unit markets, Perth, Brisbane and Adelaide also had the largest gains, with Brisbane’s Slacks Creek surging 27.4 per cent over the year, and seven of the top 10 locations featuring median values under $400,000.
Not all locations faired as well in 2023, with Hobart’s upper end of the market the softest across the country.
North Hobart and Taroona prices dropped 13.9 per cent and 13.8 per cent respectively, while the top 10 worst-performing unit markets were more diverse, spanning Hobart, Darwin, Melbourne and Canberra.
Across regional Australia, NSW’s Tralee was the top-performing house market, with 34.2 per cent capital growth, while Queensland’s Emerald saw the highest value growth for units at 20.9 per cent.
Rochester, in Victoria, was the worst-performing house market, with values down 26 per cent, while Mudgee (NSW) units recorded value falls of 11.4 per cent over the past year.
Ms Owen said ongoing tight supply and huge levels of immigration were the main drivers of price increases and rising rents.
“2023 was marked by staggering levels of net overseas migration, largely influenced by the disruption that COVID-related border closures had on migration patterns,” she said.
Ms Owen said while this likely added some upwards pressure to home values, the most obvious response in housing metrics was in the rental market.
“Since the re-opening of international borders, strong rent growth was exhibited in markets with historically high exposure to overseas migration, and this is also reflected in the Best of the Best results for 2023.”
Nationally, Kensington in Sydney’s Eastern suburbs had the highest house rent growth in the year to November, up 24.9 per cent.
In the unit segment, Lakemba in Sydney’s Inner South West saw rents soar 28.1 per cent, closely followed by Wiley Park, which was up 28 per cent.
WA’s Kambalda East (15.5 per cent) and Boulder (12 per cent) recorded the highest gross rental yields nationally, for houses and units.
According to the report, the highest sales were from Sydney’s usual Eastern Suburbs locations of Bellevue Hill and Vaucluse, along with Melbourne’s Hawthorn and Toorak, plus Coopers Shoot in the Byron Shire of the Northern Rivers region.
Nationally, Mosman, on Sydney’s Lower North Shore, recorded the highest total value of house sales over the 12 months to September at $1.462 billion, with total unit sales in Surfers Paradise reaching $1.175 billion.
Looking to 2024, Ms Owen said price growth ws likely to slow down as affordability again becomes a problem for buyers.
“We’ve seen the pace of capital growth ease gradually from June and most notably through November,” she said.
She said both volumes and auction clearance rates were declining, suggesting waning demand.
“The RBA is forecasting a rise in the unemployment rate, we’re seeing a subdued pace of growth for GDP, slowing growth in disposable household income and the lowest household saving rate since the GFC at just 1.1 per cent,” she said.
“Combined with an expectation that interest rates could hold higher for longer, households are likely to see their budgets further stretched, and more households may fall into acute financial stress.”
While the weakening market conditions has had a greater impact on the upper end of Australia’s housing market, Ms Owen said this may change in 2024.
“It is not uncommon for downswings to eventually cascade down to the more affordable segments at a lag,” she said.
“For this reason, even markets with very strong performance could see a reduction in the pace of growth through 2024.
“However, market conditions could once again strengthen towards the end of the year if there is a loosening in monetary policy.”
Ms Owen said rental growth could also start to decline if immigration levels dropped and the pipeline of new investment starts to reach the market, both from investors and new builds.
“Unfortunately for renters, a slowdown in the rate of rent increases does not necessarily mean rents will fall,” she said.