A major drop in house price increases has not stopped the market from extending its growth streak to eight consecutive quarters.
The autumn selling season could be the best time for potential homeowners to get a foot on the property ladder, as house prices reach their maximum affordability.
Annual property price increases in Australia have slowed to the lowest level since September 2023 as affordability pressures and limited borrowing power take their toll on demand, Domain’s house price report for the December quarter shows.
Softer clearance rates and more offers gave buyers more choice and helped take the urgency out of their purchasing decisions, said Nicola Powell, Domain’s head of research and economics.
“We are seeing a rapid slowdown in virtually all our capitals,” she told AAP.
“We have stable prices, some cities are in decline and the cities that are rising are not rising as quickly as they used to.”
House prices in the capitals rose by 1.1 percent over the last three months of 2024, slower than the average of recent years, but maintaining the markets’ positive growth of eight consecutive quarters.
Sydney, the country’s most expensive property market, was the only capital to decline, with average house prices falling by $1,300 this quarter.
The autumn selling season could be the best time for potential homeowners to get a foot on the property ladder, as house prices reach their peak affordability (pictured, an aerial view of Brisbane)
Dr. Powell said another factor contributing to the slower growth could be buyers waiting to buy until the Reserve Bank of Australia cuts rates sometime in 2025.
She expects the market to continue to soften into the autumn selling season before interest rate cuts, widely forecast to begin in February or May, will fuel a surge in demand from the second half of the year.
“I think it will still help influence some purchasing decisions and bring demand back into the market,” she said.
“We may see slightly improved (sales) conditions heading into perhaps the 2025 spring sales season in the second half of this year.”
Although 2025 will be the best year for buyers for a while, owning a home will still be out of reach for many.
As a result of massive price growth in 2024, Adelaide and Perth are both set to break the $1 million median house price barrier as cities coming from a lower base have to make up ground against the traditional heavyweights.
While lower forecast net migration will help moderate demand and new supply will slowly flow into the market, it will take several years before these structural affordability issues are fully resolved.
The relatively higher supply has helped Melbourne buck the trend in recent years.
House prices in the capitals rose 1.1 percent over the last three months of 2024, slower than the average in recent years (photo: an auction in Melbourne)
House prices in the Victorian capital are set to fall by one per cent in 2024, helped by the state government’s land tax changes that have deterred some investors and opened the door to first home buyers looking to enter the market.
The state leads the country in the share of financing going to first-time homebuyers, but Dr Powell says the lack of interest from investors could hurt renters in the long term.
“The downside is the rental market is still very tight,” she said.
“While there are some renters who have clearly made the transition to first home buyers, this has not been enough to balance Melbourne’s rental market.
“So those newcomers to Melbourne will see what is still largely a landlord market.”