$908K and rising: Record home prices defy war and measure pain

Home prices have hit new record highs across the country, defying cost of living pressures, high interest rates, and rising conflicts in the Middle East.

PropTrack’s Home Price Index for March, released today, revealed the national median home price increased by one-third of a percent to $908,000 last month, but the broader decline is occurring across the country.

The report found home prices are now 9.4 percent, or $94,800, higher than last year.

Brisbane recorded its biggest monthly increase in house prices in March, according to the PropTrack Home Price Index.

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Among the major cities, Brisbane recorded the largest monthly increase of 0.7 per cent, followed by Perth (0.5 per cent), while other capitals recorded softer growth.

Both Sydney and Melbourne recorded increases of 0.2 per cent.

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Year-on-year, Perth continued to lead gains, recording a 21 per cent increase in its median house price to just over $1m for the first time.

In regional areas, home prices increased by 0.4 percent in March, and are 11 percent higher than a year ago.

REA Group chief economist Eleanor Creagh said that while growth continued, momentum had slowed, with more than three-quarters of SA4 recording a decline in monthly growth compared to February.

Eleanor Creagh, senior economist, REA Group. Photo: John Gass.

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“This points to a slowdown in growth from across the country and a clear change in the cycle, as rising interest rates weigh in,” Ms Creagh said.

“While price declines remain limited, some inner and middle markets have started to emerge, particularly in Sydney and Melbourne. I wouldn’t be surprised if we see prices drop in Sydney and Melbourne (in April).

“Recent rate hikes will affect consumer sentiment, borrowing power, and erode affordability, although a strong labor market, population growth and support for first-time home buyers continue to support demand against limited supply.”

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Ms Creagh said the market was moving into a phase of slow growth, with prices likely to be lower or even lower in some markets in the coming months – although supply shortages could slow the fall.

“Another increase in interest rates, if delivered in May, and possibly one or two in the second half of the year will put significant pressure on lending and consumer demand,” he said. “That will increase the chances of the price going down.

PropTrack senior economist Eleanor Creagh says the market is slowing significantly in Sydney, as letting prices have fallen.

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“However, there are factors that can moderate the decline, such as the flow of new listings coming to the market. In 2022, while prices are falling and prices are rising, many sellers are holding back on listings and the tight supply situation was some of the factors that moderated the price drop.”

Ms Creagh said many landlords were also sitting on strong profits, which would soften any price drop.

“It is unlikely that we will see widespread forced sales,” he said. “If prices go down, it’s likely to be a moderate decline.”

New research from the Mortgage & Finance Association of Australia (MFAA) reveals four out of five mortgage holders are worried about their finances.

The MFAA’s latest Market Sentiment Survey of the Association’s real estate broker members shows rising prices, cost-of-living pressures, and growing problems with mortgage transactions are putting pressure on homes.

High fuel prices add pressure to household budgets. Photo: Caroline Tan.

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MFAA CEO Anja Pannek said the findings highlighted the growing fragmentation of Australia’s housing market.

“Australia’s housing market is no longer a one-way street,” Ms Pannek said. “What we’re seeing is a five-speed housing economy in all key regions.”

Ms. Pannek said borrowers across the country experience very different situations depending on where they live.

“We see strong optimism in some states, but there are supply constraints and pressures of not being able to buy in others, which will only be exacerbated by the increase in oil prices,” he said.

“Continued global uncertainty, conflicts in the Middle East and inflation may add to borrower caution.”

Ray White chief economist Nerida Conisbee said high interest rates and uncertainty are slowing inflation, but it may be temporary.

“Periods of heightened uncertainty tend to depress activity rather than change long-term demand,” Ms Conisbee said.

“As uncertainty rises, delayed decisions are brought forward, supporting a recovery in transaction volumes.

“At the same time, housing construction is becoming more difficult. Construction costs were already rising due to labor shortages, and commodity costs are now rising again, as property sales are under pressure. Although prices are falling due to high interest rates, continued shortages and rising construction costs will likely create long-term pressure.”