The Australian housing market has just experienced its first monthly drop in almost two years.
According to new data from CoreLogic, house prices fell by 0.1% nationally in December, with Sydney and Melbourne being the main drivers of this decline.
What’s Behind the Drop?
The decline in house prices is largely due to the hefty drops in the Sydney and Melbourne property markets.
Sydney prices tanked 0.6% in December, while Melbourne saw a 0.7% drop in its average dwelling value. This brings the median home value in Melbourne to around $774,000.
Not All Capitals Are Struggling
While some capitals like Hobart and Canberra saw a house price plunge of 0.5%, others like Darwin, Brisbane, Adelaide, and Perth actually saw a rise in prices. Perth, in particular, had a massive jump in property values, with dwellings increasing by nearly a fifth over the course of 2024.
The Rise of Adelaide
Adelaide has overtaken Perth as the nation’s fastest-growing capital city, thanks to extremely low advertised stock levels. This has supported strong growth conditions in the city, with stock levels tracking 34% below the previous five-year average.
Regional Australia Sees Growth
House prices in regional Australia were up 0.2% in December and 6% for the whole year, putting them 1.1% above the national average. The trend in annual house price movement seen in the capital cities is mirrored in their respective states’ regional towns.
What Does This Mean for the Future?
While tough economic conditions have limited Aussies’ buying power, a drop in the cash rate may not necessarily mean higher average prices. CoreLogic notes that a rate cut should help bolster demand, but it doesn’t expect lower interest rates to be the catalyst for a renewed phase of strong value growth.
Interest Rates and Inflation
The Reserve Bank of Australia has kept interest rates at 4.35% since November 2023, while underlying inflation sits at 3.5%. Financial markets predict a rate cut by April, with 0.77% worth of cuts throughout 2025.
The Current State of the Market
Sydney remains the only Australian city with a median dwelling value over $1 million, sitting at $1.19 million. Brisbane, Adelaide, Perth, and Canberra all sit in the $800,000-$900,000 range. As the housing market continues to evolve, it’s essential to stay informed about the latest trends and predictions.