Australian Home Prices Decline

SYDNEY (Reuters) – Australia’s home prices recorded their first monthly decline in nearly two years in December, as high mortgage rates impacted affordability and more sellers entered the market following a long period of price increases.

Figures from property consultant CoreLogic, released on Thursday, indicated that prices across the nation fell by 0.1% in December compared to the previous month, with values in major capitals decreasing by 0.2%.

In Sydney, prices decreased by 0.6% in December, while Melbourne experienced a 0.7% drop. In contrast, Brisbane, Perth, and Adelaide continued to see monthly gains.

Tim Lawless, CoreLogic’s research director, stated, “Growth in housing values has been consistently weakening throughout the latter half of the year, as affordability constraints negatively impacted buyer demand and the level of advertised supply increased.”

Despite the monthly decline, property values rose by 4.9% for the entirety of 2024, adding approximately A$38,000 to the median home value, which now stands at A$1.2 million (approximately $745,680). The government statistician reported a A$851 billion increase in the total value of land and housing held by households, now estimated at A$11.3 trillion.

Market resilience over the past couple of years has come as a surprise to policymakers despite interest rates peaking at 12-year highs of 4.35% in late 2023.

Recently, the Reserve Bank of Australia (RBA) hinted at a possible rate cut as early as February. However, markets anticipate only a modest decrease to around 3.60% by 2025. Lawless noted, “It will take much more than three or four rate cuts to return interest rates to the pre-pandemic decade average of 2.55%. Therefore, we do not expect lower rates to trigger a new phase of robust value growth.”

A Reuters poll from November projected home prices to rise about 5% in both 2025 and 2026, largely due to strong population growth and insufficient new supply.

($1 = 1.6093 Australian dollars)