Australian home prices recorded a decline in December 2024, marking the first drop in two years. According to the PropTrack Home Price Index, the national median price fell by 0.17%, bringing the median price down by $5,000 to $795,000. Despite this drop, values remain 4.73% higher than a year ago.
Decline Led by Capital Cities
Capital cities drove the December decline, with prices down 0.25%. Canberra (-0.61%) and Melbourne (-0.53%) experienced the sharpest falls. Sydney, Brisbane, Adelaide, and Darwin also recorded declines, while Perth (+0.39%) and Hobart (+0.03%) managed to rise.
Sydney’s median house price sits at $1.1 million, a 3.4% increase year-on-year but still down 0.29% in December. Melbourne, now the fifth most expensive city, has struggled, with its house prices rising just 13.9% since March 2020, compared to the combined capital city average of 40.2%.
Figure 1: Growth in home prices by GCCSA for dwellings based on PropTrack data
Regional Markets Show Resilience
Regional areas displayed stronger performance in December, with a 0.03% rise compared to the capital cities’ 0.25% fall. Regional South Australia led the growth, up 0.60% in December and 13.03% year-on-year. Regional Western Australia and Queensland followed with annual growth of 12.97% and 10.52%, respectively.
Perth Leads National Market Growth
Perth has been Australia’s standout performer in 2024, with house prices up 17.59% for the year, including a 0.39% rise in December. Perth’s median price has reached new record highs, cementing its status as one of the fastest-growing markets.
Drivers Behind December’s Decline
Anne Flaherty, senior economist at REA Group, attributed the December dip to elevated housing stock levels. “A relatively high number of houses for sale across the Australian market gave buyers more choice and time in the second half of 2024, driving the small December dip,” Ms Flaherty said.
The softening of price growth started in March 2024. This trend has affected both capital city and regional areas, with even strong performers like Perth experiencing moderated growth.
Melbourne’s Underperformance
Melbourne continues to underperform due to an oversupply of homes and an exodus of property investors. Ms Flaherty explained, “Driving Melbourne’s underperformance, Victoria has been relatively more successful at building more homes compared to the other states. It also continues to see a strong investor exodus due to significant tax deterrents, decreasing demand and driving up supply.”
These factors have resulted in Melbourne becoming the third most affordable capital city after Hobart and Darwin. Its median home price is expected to fall below Perth’s in 2025.
National Growth Remains Strong
Despite the December decline, national home values remain 45.1% higher than in March 2020. Houses and units saw similar monthly decreases of 0.17%, with their respective national medians at $868,000 and $653,000.
Year-on-year, houses outperformed units, with growth of 4.8% and 4.6%, respectively. Perth leads both categories, with house prices up 18.8% and units rising 17.5% year-on-year.
Affordability Concerns in Sydney
Sydney contnues to remain the most expensive city, with a median house price exceeding $1.1 million. While affordability challenges persist, growth in Sydney has been driven by its more affordable outer regions, such as the outer west and southwest.
Regional Queensland Shines
Regional Queensland continues to attract buyers, with Townsville emerging as the nation’s top-performing region, recording 26.3% annual growth. Other high-growth areas include regional South Australia and Tasmania, both achieving double-digit growth in 2024.
Economic Factors at Play
High interest rates and economic uncertainty have tempered price growth. The Reserve Bank of Australia kept the rates steady at 4.35% throughout the second half of 2024, delaying anticipated rate cuts until 2025.
“While the impact of stage three tax cuts bolstered borrowing capacities for some buyers, softer economic conditions have counteracted this effect,” Ms Flaherty noted. Elevated housing stock levels and slower demand have also given buyers more negotiating power.
Outlook for 2025
The disparity in market conditions between high-growth regions and declining cities is expected to continue in 2025, though at a moderated pace. While Perth, Adelaide, and Brisbane are likely to remain strong performers, markets like Melbourne and Darwin may see further softening.
PropTrack Home Price Index Methodology
The PropTrack Home Price Index measures monthly changes in residential property prices. Using a hybrid methodology that combines repeat sales and hedonic regression, the index provides a detailed view of Australia’s property market trends.
Conclusion
The Australian property market has experienced its first decline in two years, driven by elevated stock levels and softer demand. While some cities like Perth continue to shine, others, particularly Melbourne, face ongoing challenges. Despite the monthly dip, national prices remain significantly higher than a year ago, underscoring the resilience of Australia’s property market.
