House values across multiple capitals hit record highs

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Australia’s historic two-year interest rates cycle has had a contrasting impact on cities, suburbs and regions, new research released today shows.

CoreLogic analysis comparing the property market’s performance two years before and after the cycle of interest rate rises shows home values have risen only 2.8 per cent since April 2022.

The figure contrasts sharply with the substantial 31.7 per cent increase in the preceding two years.

The Perth housing market has shrugged off the impact of the interest rate hike cycle, new research shows. (Hamish Hastie)

The Reserve Bank of Australia (RBA) yesterday kept interest rates on hold at the 12-year high of 4.35 per cent.

CoreLogic research director Tim Lawless said the relatively small capital gain over the past two years is a legacy of the -7.5 per cent drop in national home values during the early stage of the rate hike cycle when the national index consistently fell between May 2022 and January 2023.

Since CoreLogic’s national Home Value Index bottomed out in January 2023, values have risen every month to be 11.1 per cent higher.

“The perception might be that property values are continually increasing but we can’t forget the short and very sharp downturn that occurred in the immediate aftermath of the first rate increases,” he said.

CoreLogic says rate hikes have had little impact on the performance of many Australian suburbs, with 43.6 per cent hitting a record high at the end of April 2024. Capital city suburbs have shown more resilience compared to the regions, with almost one in two (49.1 per cent) hitting a peak last month,

Since the housing market bottomed, there’s been 15 consecutive monthly increases in values nationally, but that performance does not reflect the entire market.

“Underneath the headline figure there’s significant diversity in the housing market’s performance,” Lawless said.

The percentage change in housing values through the rate hiking cycle to April ranges from a 25.7 per cent surge in Perth house values to an -11.2 per cent drop in Hobart house values.

In Sydney, house values have increased 0.4 per cent in the past two years compared with Melbourne which recorded a -4.2 per cent drop since April 2022.

Some cities have experienced strong growth in house values on the back of record-high migration levels, persistently tight rental conditions and undersupply.

Perth had 97.3 per cent of suburbs at a record high in April 2024, beating out Adelaide at 90.0 per cent and Brisbane (85.1 per cent).

But In weaker markets, not a single suburb of Hobart was at a record high and only 1.5 per cent of Melbourne suburbs – six suburbs all in the city’s south-east – were at a record high last month.

CoreLogic says the strong performance of the Perth and Adelaide markets show little sign of slowing down in coming months.

“Even in the face of higher mortgage rates and reduced borrowing capacity buyers, including investors, have turned to Perth and Adelaide for their relative affordability, strong rental conditions and higher gross rental yields,” Lawless said.

“The demand has outweighed supply, which has contributed to pushing values significantly higher over the past year,”