Adelaide and Brisbane have bucked the national trend and recorded strong house price growth as worldwide prices continue to climb.
The Knight Frank Global House Price Index and Global Residential Cities Index found that despite Australian property prices turning down, house prices in Adelaide grew 25.6 per cent in the past 12 months, while Brisbane also saw strong growth, with house prices increasing 20.4 per cent.
According to the index, Adelaide was the 10th strongest housing market in the world over the past 12 months, followed by Brisbane in 20th position.
The smaller capital cities far outperformed Sydney and Melbourne, which ranked 104 (5.1 per cent) and 109 (4.3 per cent) respectively.
Other Australian cities to make the list included Hobart (20.2 per cent growth) in 21st position, Canberra (9.9 per cent growth) came in at 67, while Darwin (7.4 per cent growth) finished 87th and Perth (6.6 per cent growth) came in at number 89.
Knight Frank’s Head of Residential, Erin van Tuil said the smaller capital cities had performed incredibly well over the past 12 months.
“Australia’s best performing cities for annual price growth, Brisbane and Adelaide, also saw elevated population growth in 2021 against the Australian average,” Ms van Tuil said.
“This most impacted the rental space, given many people moving to a new area tend to rent before making a purchase.
“The main factors continuing to drive smaller cities and regional residential markets include the relocation of digital nomads to more affordable locations, investors returning to the market seeking a higher rental yield than they could achieve in the larger capital cities and holiday homes purchased to incorporate retirement plans in the coming years.”
While markets around the world are showing signs of resilience, the Asia Pacific is ahead of the curve when it comes to the anticipated slowdown according to Knight Frank.
Australia and New Zealand are two of the seven countries that saw house prices decline slightly between March and June this year.
At 0.8 per cent, Australia saw the third largest decline in prices on a three-month basis, while New Zealand recorded the biggest decline, with prices down 3 per cent.
Buyer sentiment has shifted from a fear of missing out to a fear of overpaying, likely influenced by the new responsible lending laws and recent interest rate rises.
Ms van Tuil said the Reserve Bank of Australia was putting pressure on house prices.
“With further upward adjustments to the official cash rate and higher costs of living in the coming months, we can expect sentiment to be dampened across the Australian residential market with anticipated subdued or downward pressure on property prices over the next 18 months,” she said.
Ms van Tuil said Australian property prices might only see a minor correction.
“Our research shows that by the end of 2023, the overall Australian residential property market could experience price declines of 3 per cent,” she said.
“However, given the significant growth we have experienced over the past two years, these reductions are coming off a very high base and we’re likely now seeing a normalising of house price growth.
“We anticipate trends will move back towards positive territory in 2024 given the undersupply of new properties being built across the country.”
Overall, the global index is still rising at 10 per cent per annum with 51 of the 56 tracked countries continuing to register an increase in house prices.
This is despite expectations of a notable slowdown in the second quarter given recessionary fears, energy prices, rate rises and geopolitical concerns.
More realistically, when taking inflation into account, global house prices in real terms are averaging just 1.6 per cent growth in the year to Q2, down from 6.2 per cent a year earlier according to Knight Frank.
The strongest property market over the past 12 months has been Istanbul which has seen 184.9 per cent growth in property prices.
Top performed US cities include Miami, Dallas and Phoenix.
While the worst performed major capital city was Wellington, which has fallen 12.2 per cent in the past 12 months.