Property price growth ramps up in lively February

January presented a cooler start to the year for Australian property, but already February's results are showing renewed upward momentum for prices. 

The latest CoreLogic report found a re-acceleration in growth across most markets as buyers and sellers alike saw a restoration of confidence. 

Find out if the shift is the beginning of another new positive trend for our property markets.

National property prices: February 2024

The median Australian home value got another +0.6 per cent boost over February, nudging annual gains up to +8.9 per cent. 

After some unsteady months for several capital cities, only one closed the summer with minor negative growth.

Sydney saw a sudden momentum shift with a bump of +0.5 per cent and Melbourne returned to positive territory with a slight gain of +0.1 per cent. 

Brisbane and Adelaide maintained particularly strong growth of around +1 per cent each, while Perth remained the runaway success with another staggering +1.8 per cent uptick. 

Hobart and Darwin hovered around flat levels for the month and Canberra got a sudden value injection with a strong +0.7 per cent increase. 

Tim Lawless, CoreLogic's research director, explained that "Housing values have been more than resilient in the face of high interest rates and cost of living pressures.

"The ongoing rise in housing values reflects a persistent imbalance between supply and demand which varies in magnitude across our cities and regions."

Three key takeaways from the current market

Already in 2024 there are some positive signs for the years ahead, although it may continue to be a challenging market for renters. Here are some of the key themes that have emerged so far. 

Consumer sentiment is on the up

Sentiment has held persistently low since interest rates began to shoot up in 2022, but a shift in attitudes seems to be emerging as rates hold steady. 

“Potentially we are seeing some early signs of a boost to housing confidence as inflation eases and expectations for a rate cut, or cuts, later this year firm up,” Mr Lawless said.

With the risk of further nasty surprises from the RBA continuing to dwindle, rising consumer sentiment could help to support property prices in the months ahead. 

Auction clearance rates are strong despite higher volumes

It's been an active second half of summer with sellers emerging early and capitalising on strong property values. That's partly due to the rise in consumer confidence. 

"Auction results and sentiment have both shown a historically strong relationship with housing trends.” Mr Lawless explained. 

"The rise in clearance rates from the mid 50 per cent range late last year to the high 60 per cent range in February points to a better fit between buyer and seller pricing expectations. 

"A rise in sentiment suggests households will have a better ability to make decisions around large financial commitments, like a property purchase."

Rental markets remain exceptionally tight

While there has been a flurry of buying and selling activity around the country, it's a grimmer state of affairs for tenants who are facing persistently low vacancy rates of around 1 per cent and ever-climbing rents. 

Interestingly, Mr Lawless noted that "Although growth in unit rents is slowing, we are still seeing the cost of renting across the unit sector rising at a faster rate than houses across most jurisdictions.

"A slowing in the pace of unit rents lines up with the peak in net overseas migration in the first quarter of 2023. However, worsening affordability pressures could be another factor in this sector, given unit rents have surged 24.1 per cent higher over the past two years compared with a 16.6 per cent increase in house rents."

Regional markets are now slightly outpacing the capitals

Following a relative lull over 2023, regional markets are quietly consolidating and have tipped above capital city growth over the past quarter.

Overall gains of +0.6 per cent in February were on par with the capitals, with every state recording some degree of positive growth.

Each state regional market more-or-less mirrored its capital city counterpart for the month. Queensland, SA and WA all outperformed while more subtle growth was seen in NSW, Victoria and Tasmania. 

"Outside of the pandemic growth between 2020 and 2022, the outperformance of regional markets relative to the capital cities is a fairly new phenomenon," Mr Lawless pointed out.

"The more recent trend where growth in regional housing values has outpaced the capital cities is attributable to a slowdown in capital city growth rates rather than an acceleration in regional growth."

What's next for Australian property?

The 2023 market recovery clearly slowed in some parts of the country towards the end of the year, but there are several factors that look set to continue supporting property prices in 2024. 

Interest rates are holding steady and forecasts almost universally show that we will see rate cuts arrive before the year ends. 

That expectation looks to have buoyed consumer sentiment and could set up a positive trend in confidence for the months ahead. 

“Even with the February rise, sentiment remains in deeply pessimistic territory, but given strong demand-side pressures, we have seen a divergence between home sales and sentiment through 2023," Mr Lawless said. 

"This suggests that any lift in confidence could be amplified amid an ongoing mismatch of housing supply relative to demand."

Strong population growth in the face of an undersupplied market is also having an ongoing impact on prices. 

“The shortfall of housing supply relative to housing demand is continuing to place upwards pressure on home values across most regions."

Even so, it's widely forecast that growth in 2024 will be more moderate than last year. The big question is how much interest rate cuts could stimulate the market when they do arrive.