CoreLogic's Home Value Index (HVI), which tracks Australian property prices, rose 0.6% through November.

According to the index, the national median dwelling price is now $753,654, a new record high, and marks 8.3% growth from the trough of January 2023.

Perth posted the highest rate of growth since March 2021 (up 1.9%), with Brisbane (up 1.3%) and Adelaide (up 1.2%) also remaining strong.

However, this was overall the softest monthly growth since the recovery began, with Sydney property growing just 0.3%, while prices dropped in Melbourne (-0.1%), Hobart (-0.1%), and Darwin (-0.3%).

CoreLogic research Director Tim Lawless said it was clear the Melbourne Cup day rate hike had taken some heat out of the market, and pointed to several other factors that are slowing the rate of growth.

"Rising advertised stock levels, worsening affordability and persistently low consumer sentiment are also acting as a drag on value growth in some markets," he said.

Potential sellers who held out while prices were down have seemingly been encouraged by the strong growth throughout 2023, with the number of properties listed now above the previous five year average in Hobart, Canberra, Melbourne and Sydney.

"In these cities, market conditions are now in favour of buyers as higher stock levels provide more choice, less urgency and greater opportunities to negotiate,” Mr Lawless said.

On the other hand, the cities where growth has not slowed were also those that have not seen a substantial increase in the number of available properties.

Perth listings are almost 40% below their five-year average for this time of the year, while listings are more than 30% down in Brisbane and Adelaide.

Louis Christopher, Managing Director of SQM research, is also tipping Perth and Brisbane for a big 2024.

"The cities of Perth and Brisbane are the only cities expected to record price rises [in 2024] with each respective market driven by a tailwind of a recovering Chinese economy which is anticipated to see strong demand for base commodities such as Iron Ore," he said.

Queensland and Western Australia are two of the most resource rich Australian states, and a mining boom might translate to increased demand for property as more jobs attract interstate and overseas migration.

Rate rises to finally take their toll?

Conventional wisdom suggests as interest rates go up, property prices decrease with the borrowing power of buyers curbed.

The Australian market has defied this throughout 2023, with strong growth in spite of continued rate increases, which analysts like Mr Lawless have partly attributed to low supply levels as Australians held off on selling while prices were down.

With the threat of further rate rises early next year though, and inflation more persistent than expected, buyer sentiment might be more pessimistic in 2024, slowing growth.

"We don’t expect to see a material lift in housing activity until interest rates reduce, and that isn’t likely until the second half of next year," Mr Lawless said.

Supply deficit to be addressed?

At the same time, one of the long term challenges facing the Australian property market moving forward is that there simply might not be enough homes to go around.

Continued strong overseas migration looks set to continue, and there has so far been little indication of an equivalent rise in the construction of new homes.

Housing Australia predicted earlier this year Australia would be short more than 100,000 homes by 2027, and both State and the Federal Government have acknowledged this is a critical issue.

The Housing Australia Future Fund (HAFF) commenced earlier in the month, a $10 billion investment where the proceeds will be put towards the construction of new properties, which might help alleviate some of this pressure.

The private sector will likely still need to do the bulk of the heavy lifting though, and according to the CoreLogic HVI report, profit margins in the construction industry are likely to remain compressed in 2024, despite costs easing somewhat in the past couple of months.

Picture by Michael on Unsplash

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