National home prices hit a new record in May

National home prices lifted 0.3% to hit a new record in May 2024.

Prices are now 6.68% above May 2023 levels and up 9.58% from their December 2022 low.

National home prices increased for the 17th consecutive month, despite a rise in the number of homes for sale this year, as strong population growth, tight rental markets, and home equity gains all contributed to demand, while the supply side of the housing market has fallen short.

Despite a rise in the number of homes for sale this year, strong population growth, tight rental markets, and home equity gains continue to bolster strong demand.

Meanwhile, building activity remains challenged by capacity constraints and higher costs, with consequent tight housing supply pushing both prices and rents higher.

However, it is likely the pace of growth will continue slowing through the seasonally quieter winter period, particularly with interest rate cut expectations pushed out to late-2025.

National home prices have cycled through 17 months of consecutive growth after lifting 0.3% to hit a new record in May, according to the latest PropTrack Home Price Index Report as strong population growth, tight rental markets, and home equity gains all contributed to demand, while the supply side of the housing market has fallen short.

This brings dwelling prices up 2.73% year-to-date.

Ms Eleanor Creagh, Senior Economist at PropTrack commented:
“ With housing supply unable to meet demand, national home prices have cycled through 17 consecutive months of growth to hit a fresh peak in May.

Prices are now 6.68% above May 2023 levels and up 9.58% from their December 2022 low.

Despite a rise in the number of homes for sale this year, strong population growth, tight rental markets, and home equity gains continue to bolster strong demand.

Meanwhile, building activity remains challenged by capacity constraints and higher costs, with consequent tight housing supply pushing both prices and rents higher.

This imbalance between supply and demand has offset the higher interest rate environment and the impact of affordability constraints, with home prices continuing to lift.

Despite some easing in the rate of population growth and more stock on market, home prices are expected to lift further in the months ahead.

However, it is likely the pace of growth will continue slowing through the seasonally quieter winter period, particularly with interest rate cut expectations pushed out to late-2025."

Key findings from the May 2024 Proptrack report:

National home prices lifted 0.30% to hit a new record in May, bringing prices up 2.73% year-to-date. Prices are 6.68% above May 2023 levels and up 9.58% from their December 2022 low.

Prices in the combined capital cities rose 0.41% to a new peak in May. Capital city prices are now up 7.22% year-on-year, though performance has diverged between capitals as well as regional areas.

All capitals bar Hobart (-0.13%) and Canberra (-0.21%) saw prices rise in May, though the pace of home price growth has slowed since the end of the summer in every capital city.

Perth (+0.73%), Brisbane (+0.67%) and Adelaide (+0.53%) recorded the strongest price growth in May. In keeping with the trend seen for much of the past two years, these markets remain the strongest for annual growth, with Perth prices up 20.58% over the past year, while Adelaide and Brisbane have grown 14.49% and 13.69% respectively.

Brisbane prices are 18.15% above their December 2022 low, as a result Brisbane is now the second-most expensive capital on par with Canberra and ahead of Melbourne for the first time since 2009, following a period of consistently strong growth.

Prices in capital cities have outpaced regional areas over the past year. This trend continued in May, with prices in the combined regional areas remaining flat while regional NSW (+0.16%) and regional Tasmania (+0.12%) were the only regional markets to see price growth in May.

House and unit prices lift

House prices have grown more quickly over the past year and are now 6.97% higher than a year ago, while unit prices are up 5.26% on their year ago levels.

Ms Creagh explains:

"This continues the trend seen throughout the pandemic - house values have experienced rapid growth up 46.9% on pre-pandemic levels, while the growth in unit values has been more moderate up just 22.6% on pre-pandemic levels.

The growth in home values over the past few years has been a tale of a two-speed market and while typically houses command a premium over units, and over the long run houses tend to outperform units with respect to price growth, since the onset of the pandemic, house price outperformance reached historic extremes."

Outlook

Home prices in 2023 remained resilient to the higher interest rate environment and this improvement in conditions that materialised in 2023 has continued in 2024.

Ms Creagh explained...

The stable interest rate environment has likely been a driver of confidence among buyers and sellers, and with housing supply unable to meet demand across the country, home prices reached a fresh peak in May as robust demand has continued to push prices upwards.

However, in every capital city the pace of home price growth has slowed since the stronger pace seen through the summer selling season.

Higher interest rates and inflation are squeezing household budgets, and many remain concerned about the economic outlook. But property prices are expected to lift further this year, with housing demand buoyed by population growth, tight rental markets, and home equity gains, alongside the stable interest rate environment.

Further, ongoing home price rises are likely incentivising many to overcome affordability challenges and transact with the expectation of continued growth.

Meanwhile, the supply side of the housing market has fallen short in responding to substantial demand. Building activity is at decade low levels, exacerbating the housing supply shortage.

This imbalance between supply and demand has offset the higher interest rate environment and deterioration in affordability and is expected to continue to do so, fuelling further price rises.

Despite some easing in the rate of population growth and more stock on market, home prices are expected to lift further in the months ahead.

But it is likely the pace of growth will continue slowing through the seasonally quieter winter period, particularly with interest rate cut expectations pushed out to late-2025.

The smaller capital city markets, Perth, Adelaide, and Brisbane are likely to maintain their outperformance despite growth slowing, as very low stock levels intensify competition amid strong buyer demand.

Real Estate News

National home prices hit a new record in May | Latest Proptrack Report