Shock figures show where house prices are FALLING in Australia – and the reason for the decline

Property prices in Sydney and Melbourne have fallen as the number of foreign visitors falls and a slowdown in immigration is expected to further reduce prices.

Property group CoreLogic says a drop in permanent and long-term overseas arrivals from record highs will cause a slowdown, especially in markets that have become too unaffordable.

“Less migration is likely to lead to a further decline in rental demand and, in the medium term, reduced demand for home purchases,” CoreLogic said.

Hobart, which does not receive a large influx of overseas or interstate migrationalso declined into 2024, while Perth, Brisbane and Adelaide reached new heights last year with double-digit annual growth.

The average house price in Sydney has now fallen for three months in a row since peaking in September, falling 1.6 per cent to $1.471 million in the December quarter.

Melbourne’s average house price fared even worse, falling 1.8 per cent to $917,616 in the final three months of 2024, making it Australia’s fourth most expensive capital market after Sydney, Brisbane and Canberra, despite having the second highest residents of Australia.

The Victorian capital suffered its worst annual decline of 2.9 per cent in 2024, after peaking in March 2022 before Reserve Bank rates rose, but was hit by a $975 state land tax on investors last year.

Prices in Sydney rose by just 2.5 percent last year, after experiencing double-digit annual growth in March.

The fall or slowdown in house prices in Australia’s two biggest cities occurred as immigration levels fell from record highs.

During the last financial year, 445,600 migrants moved to Australia, a big drop from a record high of 548,800 in the year to September 2023.

Sydney and Melbourne host the majority of new overseas migrants; 61.8 percent of them move to New South Wales or Victoria.

In October, Australia’s net overseas migration level hovered at 448,090 arrivals.

But the Treasury Department expects those inflows to slow to 340,000 by June 2025, and last month published new forecasts in its Mid-Year Economic and Fiscal Outlook.

The Treasury’s Population Statement predicts Australia’s annual population growth will decline from 2.1 per cent in 2023-24 to 1.2 per cent in 2034-35 ‘while net overseas migration declines’.

“This will reflect a decline and subsequent stabilization in arrivals, and an increase in departures,” the report said.

States with higher inflows of interstate migrants were still performing strongly at the end of 2024.

The fall or slowdown in house prices in Australia’s two largest cities occurred as immigration levels fell from record highs (stock image)

Average house prices in Perth rose 18.7 per cent to $847,518 last year, and 1.7 per cent in the December quarter, with Western Australia seeing the strongest population growth in the country at 2.8 per cent.

House prices in central Brisbane rose 10.2 per cent to $977,575 and 1.1 per cent during the final three months of 2024.

Adelaide’s equivalent house price rose 12.5 per cent over the year to $866,327, and 2 per cent over the quarter, despite South Australia experiencing weaker population growth.

Parts of Sydney’s outer south-west are still growing strongly, with Fairfield Heights seeing its average house price rise 12.6 per cent last year to $1.112 million.

But in beachside Cronulla, average house prices fell 8.6 per cent to $2.708 million last year.

Other capital cities with weaker population growth fared poorly last year, with the average house price in Hobart falling 0.5 per cent to $693,924 last year.

The Tasmanian capital peaked in March 2022, when the RBA cash rate was still at a record low 0.1 per cent.

Canberra, an expensive market with below-average population growth, saw the average house price fall 0.3 per cent to $965,910 in the December quarter, representing a weak annual growth rate of 0.4 per cent.

National capital peaked in May 2022, the month in which the Reserve Bank raised interest rates for the first time since 2010.

CoreLogic’s research director Tim Lawless said house prices fell in cities that had become too unaffordable.

“This result shows that the housing market is catching up with the reality of market dynamics,” he said.

“Home value growth continued to weaken in the second half of the year as affordability restrictions weighed on buyer demand and advertised supply continued to rise.”

House and unit prices across Australia rose 4.9 per cent last year but fell 0.1 per cent in December, marking the first national monthly decline since January 2023.

Mr Lawless said interest rate cuts alone would be insufficient to revive activity in weaker property markets unless the Australian Prudential Regulation Authority, which oversees banks, relaxes lending rules.

Since the end of 2021, lenders have been required to take into account a potential borrower’s ability to cope with a three percentage point increase in variable mortgage rates.