Renters Find Relief as Growth in Rent Prices Slows

In August, home prices across Australia went up by 0.5%, continuing a 19-month streak of growth. However, the growth is slowing down, with the rise over the past three months at 1.3%, which is less than half of the 2.7% growth seen during the same time in 2023.

While there are still more people looking to buy homes than there are homes available, supply and demand are starting to balance out. Supply varies between regions—Melbourne has 25% more homes listed than usual, but Perth and Adelaide have over 40% fewer listings compared to their five-year average.

Different cities are seeing different trends. Perth saw the biggest increase in home values with a 2.0% rise, followed by Adelaide (1.4%) and Brisbane (1.1%). Sydney had a smaller gain of 0.3%. On the other hand, home values dropped in Canberra (-0.4%), Melbourne (-0.2%), Darwin (-0.2%), and Hobart (-0.1%).

Overall, the growth in home prices is slowing down, especially in Brisbane, where quarterly growth dropped from 4.1% in May to 2.9% in August, indicating that demand might be easing in this increasingly expensive market.

CoreLogic’s Head of Research, Eliza Owen, attributes the slowdown in home value growth to affordability challenges, despite seasonal factors playing a role. The Home Value Index rose by 1.7% in the three months to August, down from 3.3% in 2023.

Owen noted that strong growth in cities like Perth, Adelaide, and Brisbane may slow as affordability tightens due to high interest rates and cost-of-living pressures. Cheaper markets continue to outperform, with affordable homes rising 2.7% compared to just 0.3% in higher-priced homes. Unit values also rose faster than house prices in many cities.

For the first time since 2015, Perth’s median dwelling value ($785,250) surpassed Melbourne’s ($776,044), with Adelaide also overtaking Melbourne. Melbourne has experienced six consecutive months of declines due to higher property taxes, weaker migration, and increased housing supply, contributing to lower demand. Hobart and Canberra are also seeing similar declines.

Rent growth is slowing, providing relief for renters. CoreLogic's rent index remained flat in August, with Sydney seeing its second straight month of rent declines. While rents rose 7.2% over the past year, this is the slowest annual growth since May 2021, with most cities seeing rent growth ease.

Eliza Owen from CoreLogic attributes the slowdown to reduced migration and an increase in shared housing due to high rent costs. Investor activity is up, but the construction sector is struggling, keeping rent and property prices high. Rent yields, particularly in Brisbane and Adelaide, are now on par with Melbourne, which may slow investor interest in high-growth cities.

Housing values are expected to rise modestly through 2024, driven by supply shortages in new homes. Despite tax cuts and energy rebates improving household finances, they are unlikely to significantly increase home-buying due to the gap between incomes and property prices. CoreLogic estimates an affordable home for the median-income household is around $500,000, compared to the actual median value of $802,000.

Heading into spring, sellers should be mindful of local market conditions, as increased listings may not match buyer demand, especially in areas like Victoria and Tasmania, where listings are growing despite weak price performance.

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