A nation divided: Why prices are surging in half the capitals while the others are lagging

Property price growth has diverged across Australia, with values still rising rapidly across much of the country but slowing down overall.

Property prices rose again over July, taking the median national home value to a new record high, according to the latest PropTrack Home Price Index.

But the marginal 0.08% increase in values over the month meant price growth has slowed significantly compared to previous months as housing affordability worsens.

PropTrack senior economist Paul Ryan said this was the smallest monthly increase recorded since prices stopped falling in late 2022.

“National prices continue to increase, but price growth has slowed,” he said. “In part this slowing is seasonal, but it also reflects binding affordability constraints.”

“The slowdown in price growth is not unexpected. It coincides with continued strong listings activity and July is the seasonally weakest month for home price growth." 

However, examining price movements on a capital city and regional level reveals key differences across the country, with variances in affordability and supply causing prices to move at different speeds in each market.

Half the capitals are still experiencing strong growth while the others are lagging or falling behind.

Prices are growing at a rapid or moderate rate in Perth, Adelaide, Brisbane and Sydney, with subdued or even negative growth in the other capitals.

“All markets continue to see strong housing demand, tight rental markets and rebounding investor activity,” Mr Ryan said.

“But differences in relative affordability and home construction are driving divergence in outcomes across regions.”

“Looking across the capital cities, there is a clear trend that more affordable regions have tended to perform the best, no doubt driven by challenged affordability from the continued high interest rate environment.”

Where home prices are surging

With price growth of 22.8% over the past year, Perth was the strongest performing capital on an annual basis. Prices in the Western Australian capital rose a further 0.88% in July.

A typical Perth house is now worth $790,000, while the median apartment value is $530,000.

Adelaide posted growth of 0.58% in July, with prices up 14.8% annually. Its median home value is now just $33,000 lower than Melbourne’s.

Brisbane was close behind in terms of price growth, with a 0.34% increase in values over the month and a 13.9% rise over the year.

Brisbane recently overtook Melbourne as Australia’s second-most expensive capital after Sydney.

“Perth, Adelaide and Brisbane continue to outperform,” Mr Ryan said. “These markets have enjoyed relative affordability, but with Brisbane now the second most expensive market, price growth there may slow over the coming period.”

Meanwhile, values in Sydney increased by 0.12% in July, taking the city’s median 6.28% higher than a year ago.

More details: https://www.realestate.com.au/news/a-nation-divided-why-prices-are-surging-in-half-the-capitals-while-the-others-are-lagging/