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Home prices hit highs as downside risk looms

Home prices hit highs as downside risk looms
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Although national home prices have continued to recover, signs of easing and risks are emerging, PropTrack and CoreLogic have found.

PropTrack’s Home Price Index has revealed that national home prices “set a record” in October as the spring selling season marches on, with prices up 0.36 per cent month on month, putting prices up 4.93 per cent in 2023 so far.

Similarly, CoreLogic’s Home Value Index (HVI) rose 0.9 per cent in October, up from the 0.7 per cent (revised down from 0.8 per cent) rise recorded in September. According to CoreLogic, the national HVI has increased 7.6 per cent since bottoming out in January, with the index now sitting half a per cent below April 2022’s historic highs.

PropTrack’s Home Price Index has found that prices in Sydney have recovered from last year’s declines, reaching 0.32 per cent above its prior peak recorded in February 2022, with prices increasing 0.37 per cent in October to a record high, up 7.62 per cent so far this year.

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Meanwhile, CoreLogic’s HVI has recorded Sydney’s values rise by 10.9 per cent over the first 10 months of 2023, followed by Perth (10.8 per cent) and Brisbane (10.2 per cent).

PropTrack senior economist Eleanor Creagh said: “Although the volume of new listings hitting the market has risen over the spring selling season, the demand for housing has remained strong, fuelling further home price growth and reflecting the sustained improvement in conditions.

“Strong demand stemming from the rebound in net overseas migration, tight rental markets and limited housing stock has offset the impacts of substantial rate rises and the slowing economy.”

Meanwhile, CoreLogic research director Tim Lawless stated that nominal recovery in the HVI is likely “around the corner”.

“At this rate of growth, we will see the national HVI reach a new record high midway through November, recovering from the 7.5 per cent drop in values recorded over the recent downturn between May 2022 and January 2023,” Mr Lawless said.

A slowdown in growth and downside risk on the horizon

CoreLogic noted that while housing values are consistently trending up across most capital cities, a slowdown in the quarterly pace of growth is evident.

In the three months ended June 2023, the capital cities recorded home values increase by 3.7 per cent, however, the growth trend has drifted down to 2.6 per cent over the three months to October, CoreLogic has found.

“The slower rate of appreciation can probably be attributed to a combination of higher advertised stock levels alongside stretched affordability,” Mr Lawless said.

“With an acceleration in the flow of new listings coming onto the market, it’s unlikely buyer demand will be able to keep pace as we move through spring amid high interest rates and low sentiment.”

Additionally, Ms Creagh flagged that dwelling approvals declining to record lows during this year along with a sharp rise in construction costs and compounded by costly delays stemming from supply and labour shortage have resulted in slowed completion of new homes.

“Despite a weaker outlook for the economy, population growth is rebounding strongly and this looks set to continue,” Ms Creagh added.

“Interest rates may rise further, but they are likely close to, if not at, their peak.

Together with a shortage of new home builds and challenging conditions in the rental market, home prices are expected to rise further.”

[RELATED: November sellers achieve highest prices: PropTrack]

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