Home values drop for first time in nearly 2 years

According to the CoreLogic Hedonic Home Value Index (HVI) – which is calculated using recent sales data combined with property attribute data to track the market value of residential property stock – the drop comes amid high interest rates, cost-of-living pressures, and reduced borrowing capacity.

Overall, Australian home values rose by 4.9 per cent in the year 2024, adding approximately $38,000 to the median value of a home.

The median value of Australian residential property at 31 December 2024 was $814,837, according to CoreLogic.

The greatest period of growth was in the first half of 2024, when values rose 4.1 per cent, before slowing to just 0.7 per cent through the second half of the year. Indeed, the HVI was nearly flat in November 2024 before dropping in December, resulting in the final quarter of the year seeing values fall by 0.1 per cent.

Affordable markets fared better than more expensive areas, with housing values in the lower quartile of the market (i.e. the most affordable) up 9.8 per cent in 2024, while upper quartile values rose by only 1.5 per cent.

Across the combined capitals, housing values were up 4.5 per cent across the combined capital index.

Regional housing markets performed more strongly, with values up 6.0 per cent over the year.

Where did prices grow the most?

Market performance was mixed across the nation in 2024, with five of the eight capitals recording a decline in values between July and December as geographical disparities widen.

When looking at how prices fared in different geographies across 2024, Western Australia was the clear leader in value growth.

Perth saw the largest annual growth, with home values soaring by 19.1 per cent, followed by Adelaide at 13.1 per cent and Brisbane at 11.2 per cent. These mid-sized capital cities experienced strong demand, especially in more affordable price brackets.

Regional markets, particularly in Western Australia, South Australia, and Queensland, also performed well, with regional Western Australia leading at 16.1 per cent.

But for the final month of the calendar year, Adelaide outperformed the other capitals, with home values rising by 2.1 per cent, driven by low housing stock. Perth followed closely with a 1.9 per cent increase, while Brisbane saw a more modest 1.3 per cent gain. Similarly, regional Western Australia house values rose 2.1 per cent while regional Queensland was up 1.3 per cent.

However, CoreLogic suggested that the double-digit annual growth in 2024 in the mid-sized capitals meant these markets have “passed their peak rate of growth”.

For example, the HVI shows that the rolling annual change in Perth eased from a cyclical peak of 24.7 per cent over the year ending July, while Adelaide’s 12-month trend slowed from 14.6 per cent in August, and Brisbane’s annual gains peaked in April at 17 per cent.

Victorian values continue to plummet

In contrast, Victoria was the weakest state property market in 2024. Melbourne recorded the biggest decline in values, with values falling by 3 per cent, while regional Victoria properties had declines of 2.7 per cent.

The Northern Territory also saw prices drop (down 4.7 per cent), while Hobart and Canberra also saw slight reductions of 0.6 per cent and 0.4 per cent, respectively.

Melbourne recorded a 0.7 per cent decline in December 2024, and Hobart and Canberra both saw slight drops of 0.5 per cent and 0.3 per cent, respectively.

Regional Victoria and the Northern Territory markets saw declines of 2.7 per cent and 4.7 per cent in the final month of the calendar year, reflecting weaker demand in these areas.

CoreLogic’s research director, Tim Lawless, said: “This result represents the housing market catching up with the reality of market dynamics.

“Growth in housing values has been consistently weakening through the second half of the year, as affordability constraints weighed on buyer demand and advertised supply levels trended higher.”

Looking at the different markets, Lawless added: “Extremely low advertised stock levels have continued to support strong growth conditions across Adelaide, with stock levels tracking -34 per cent below the previous five-year average in mid-December.

“Perth, on the other hand, has seen a clear lift in advertised supply, which has provided buyers with more choice and less urgency, supporting a sharper slowdown in value growth relative to Adelaide.”

“With worsening affordability constraints and reduced borrowing capacity, we have seen buyer demand pushed towards lower priced markets, which has, in turn, supported stronger growth conditions in these areas.”

According to CoreLogic, house values will continue to fall into 2025, with CoreLogic and REA Group’s property data insights arm, PropTrack, recently stating that the drag on buyer demand, exhibited towards the end of 2024, may continue, which could then cause a small decline in home values in the early part of the new year.

According to CoreLogic, waning demand, rising levels of advertised supply, and a changed outlook for inflation and interest rates have all cooled demand.

CoreLogic said that “most expectations are for a ‘shallow’ rate-cutting path”, with forecasts across the big four banks placing the cash rate between 3.1 per cent and 3.6 per cent by the end of 2025, which would reinvigorate demand.

There is also some uncertainty as to how much a reduction in interest rates would increase buyer demand, given affordability constraints are still so high.

[Related: House prices set to dip in early 2025: CoreLogic]