Father and son working in the garden of their home.

Housing market update: April 2024

Key points

House prices across Australia: the current outlook

House prices across Australia rose by a strong 9 per cent between March 2023 and March 2024. What the last 40 years shows us, is that house prices usually rise following a period of decline. What makes this current price surge unusual is that it has occurred without the assistance of any cash rate reduction. 

The national rise disguises the mixed picture across markets. In the capital cities, the most expensive houses have typically underperformed. This could mean affordability has become a growing issue, although the most expensive housing market in the country – Sydney standalone housing – is an outlier to this usual pattern.

At a state and territory level, there has been more consistency of price performance. We’ve seen growth in houses and units in Queensland’s capital and regions, and South and West Australia, but softer performance in Victoria, Tasmania and the Territory markets. New South Wales is the exception, with price growth strong in Sydney housing, but more modest in Sydney units and the wider NSW region.

Annual percentage change in house prices from March 2023 to March 2024

City Houses Units Regional Houses Units
Sydney 13 7 NSW 6 5
Melbourne 3 4 VIC 0 -1
Brisbane 16 18 QLD 10 14
Adelaide 13 15 SA 13 8
Perth 23 20 WA 14 16
Hobart 0 -2 TAS 2 2
Darwin 0 0 NT -5 1
Canberra 2 -2        
Source: CoreLogic, BOQ Calculations

Lack of housing supply has impacted the cost of renting

It is now widely (but not universally) agreed that the main driver of the recent rise of house prices has been very strong demand at a time of a low supply.

Typically, higher interest rates would have substantially cooled demand, but on this occasion, that trend has been surpassed by the major increase in population. At the same time, new supply has been limited by a range of factors, including the high cost of land and materials, skilled labour shortages, and the high number of bankruptcies amongst builders.

The demand for housing at a time of low supply has not only boosted house prices but has also led to low vacancy rates and rising rental costs. 

Rental properties can be thought of as the property market equivalent of dividends for the equity market. Just as rising dividends support higher share prices, rising rental costs support a stronger property price.

The spread between rental yields and (‘real’) interest rates can be thought of as the additional return that buyers demand for the risk in purchasing residential property. This spread varies between markets and type of property, reflecting different supply-demand dynamics.

Broadly, over the last year house price growth has moved in line with the growing rental costs, leaving the rental yield essentially unchanged. Using each city’s long-term average spread to real interest rates as a guide, the Sydney, Brisbane, and Adelaide markets all look over-valued, albeit not yet at a level historically associated with a house price correction. The Melbourne and Perth markets are trading around their long-term average.

Why have Melbourne property prices weakened?

The average price of a Melbourne standalone house is the lowest it has been compared to its Sydney equivalent in around 20 years. Why the underperformance of the Melbourne market? Partly, it might reflect the greater stock of housing available for sale in the Melbourne market relative, to say, Brisbane and Adelaide.

Investor demand has also been stronger in Adelaide and Brisbane (owner-occupier demand has been low in all states, although it has been a little more robust in Adelaide). But the demand-supply dynamics in Sydney don’t appear that different to Melbourne’s.

Perhaps the reason is what has happened to the number of people per household. According to the RBA, that number declined over COVID, particularly in Melbourne. The rise in rental costs at a time of general higher cost of living will lead to a number of people either having to move into a share house or back home, which could play a role in reducing demand in Melbourne, more than in some of the other cities.  

Forecast for standalone house prices for 2024 and 2025

So far in 2024, house prices have broadly moved in line with my forecasts. Melbourne is the exception, where my thinking was the combination of strong population growth and decent value would see stronger growth. I am going to keep to the view of stronger growth in Melbourne prices, although four successive monthly declines in standalone house prices (according to CoreLogic data) is seriously testing that view.

Annual percentage change to standalone house prices
City 2023 (actual) 2024 (forecast) 2025 (forecast)
Australia 7 8 7
Sydney 13 6 5
Melbourne 4 7 9
Brisbane 12 9 6
Adelaide 9 8 6
Perth 19 15 7
Hobart -1 4 7
Darwin -1 2 5
Canberra 0 3 6
Note:  Numbers are for standalone houses and are annual % change end December. Forecasts are based upon CoreLogic house price data. Forecasts are by BoQ Economics.

Elsewhere, the Perth market looks on track for another very strong year, while continuous growth looks to be on the cards in Brisbane and Adelaide.

Modest but decent growth is likely for Sydney. Some growth appears likely in the Canberra, Darwin and (particularly) Hobart markets this year.

The likelihood of rate cuts should provide support for decent house price growth in 2025. Growth is likely to be strongest in the markets that have seen the lowest growth over the past couple of years (Melbourne, Hobart, Canberra and Darwin).

We really do live in interesting times.


Peter Munckton
BOQ Chief Economist.