Home values fall for the year, but Sydney leads price resurgence

Blue blob over Sydney coastline.

The latest data from property watchdog CoreLogic reveals home values across Australia fell -5.3% in the year to June 2023. This decline flows from the significant price plummet Australia experienced nationwide last year. 

However, in the three months to June, home values bounced back +2.8% – the highest quarterly improvement since the beginning of 2022. Sydney led the regrowth with a +4.9% jump, supported by strong buyer activity in Brisbane (+3.0%), Adelaide (+2.1%), and Perth (+2.8%).

CoreLogic warns if this trend continues, it will effectively cancel out any meaningful declines from last year. This could push prices back to heights similar to the last property boom and make financing a home loan much harder. 

While this news is great for anyone who has potentially lost home equity due to falling property prices, it could be worrying for first homebuyers. So what’s going on? And is there a hidden opportunity in the numbers?

High interest rates smother first homebuyer growth in the property market

Woman hanging onto rising graph.

Typically, high interest rates mean lower property prices, which lowers the cost of a home loan deposit and makes ownership more affordable. 

However, if prices rebound and interest rates stay overblown, it significantly raises the cost of entry. Australia’s largest and most reliable group of property buyers – first homebuyers – may find themselves locked out of housing because they can’t cope with the rise in deposits and the rise in repayments.

Why are Australian property prices rising again?

Woman reaches down to assist another one onto the top of a coloured bar.

Rising interest rates haven’t warded off the kinds of buyers hitting the market lately. This renewed interest has therefore pushed up prices because vendors can take advantage of the competition, particularly in intense markets like Sydney. According to Domain, overseas investors looking to buy in Australia and cashed-up renters have been the main culprits driving price hikes.

Whenever the Reserve Bank of Australia raises the cost of housing finance, buyer interest wanes because mortgages become less attractive and less affordable. Without as much competition, sellers find they may have to lower their asking price or compromise just to part with properties.

But with a potential peak to rising rates in sight, buyer interest has rekindled and reheated the property market. Even then, CoreLogic notes the growth rate in June seemed hardly affected by the June cash rate decision; rate hikes just can’t make a dent in the budgets of the most eager and ready buyers. 

It’s worth noting, however, that price rises haven’t been felt universally. Sydney, Brisbane, and Perth have done a lot of heavy lifting for the quarterly numbers, while less popular markets like Hobart (+0.1%), Darwin (-0.3%), and even Canberra (+0.8%) paint a more modest picture. 

The capital cities can also over inflate the growth nationally. Regional Australia only posted a +1.1% quarterly growth into June compared to the combined capitals (+3.3%). Prices may be skyrocketing in some places, but that doesn’t make it a universal rule.

In fact, it comes as a timely reminder that where you buy matters. PropTrack noted last week that more affordable housing can be found away from the inner cities, making them an attractive opportunity for first home buyers looking for a way onto the property ladder. 

On the other hand, rising values are a great opportunity for homeowners to take advantage of a potential rise in equity. A higher home value could lower your LVR since your mortgage debt shrinks in comparison – and lower LVRs mean you could be eligible for a lower interest rate. For homeowners looking to save on mortgage repayments, refinancing to a lower LVR tier could mean a few hundred dollars saved a month.

Compare low interest rate home loans in the table below.

Compare low interest rate home loans - last updated 11 December 2023

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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