In the face of elevated interest rates and global uncertainty, the Australian housing market demonstrated surprising resilience throughout 2024 with the number of home sales increasing 8% on the previous year, according to CoreLogic's Best of the Best report for 2024.
The total number of home sales reached 528,000 nationally in the 12 months to November, representing a 6.0% rise from the previous five-year average.
Over that same period, home values have also seen a 5.5% increase, with the combined value of Australian homes surpassing $11 trillion.
CoreLogic Head of Research, Eliza Owen, said: "The market's initial strength in 2024 gradually waned due to declining demand, rising levels of advertised supply, and a shifting outlook for inflation and interest rates."
She said the trend was evident in the national CoreLogic Home Value Index, which slowed to a mere 0.1% increase in November.
"Beyond the market conditions, the key theme throughout the year was one of variability."
Growth conditions varied significantly across the market, with annual value changes ranging from a -2.3% decline in Melbourne to a 21.0% rise in Perth.
Regional markets exhibited similar diversity, with values falling by -2.7% in regional Victoria and rising by 15.5% in regional Western Australia.
"However, even in high growth markets of Adelaide, Brisbane and Perth, there are distinct signs of a cyclical slowdown, with the quarterly pace of gains easing over the course of the year."
"Interestingly, the quarterly value decline across weaker capital city performers has shown marginal signs of easing toward the end of 2024. This could signal some stabilising of values in weaker markets through 2025, and a narrowing of the range in capital growth over the next 12 months."
Buyers seek value
Responding to the elevated interest rates and affordability challenges, the report shows buyers flocked to more affordable segments of the market.
Through the year to November, the bottom quartile of national market values rose 10.3%, far outperforming the middle of the market and upper quartile of home values, where stretched affordability may have constrained further growth.
This trend toward faster growth in more affordable markets was reflected in the Best of the Best results for capital cities in 2024. The top growth house markets were all located in Perth, and half of the suburbs had a median house value below $661,000, which is the 25th percentile house value nationally.
The top growth unit markets were located across Perth, Brisbane and Adelaide, and each of the top 10 had a median unit value below $600,000.
Ms Owen pointed out that as the wealthy, high-deposit buyer pool may thin out the longer the cash rate sits at 4.35%, and low-value markets may lose their appeal as demand pushes previously affordable markets higher.
Top 10 sales nationally
The national top 10 sales for the year featured Sydney's usual Eastern Suburbs set, including Point Piper, Bellevue Hill, Rose Bay and Vaucluse, along with Melbourne's Toorak, as well as a few additions from Queensland in Noosa Heads and Mermaid Beach to deliver an east coast skewed list.
Nationally, Mosman in Sydney's Lower North Shore once again recorded the highest total value of house sales over the 12 months to November at $1.652 billion, while Bellevue Hill ranked as the most expensive suburb for houses in the country with a median value of almost $10 million.
Best and worst performers for value growth
Two regional markets took the top spots for value increase nationally, with WA's Beachlands house market rising 38.4% in value over the year, while QLD's Dolphin Heads saw the highest value growth for units at an impressive 52.8%.
Across the capital city markets, Perth dominated the list to take out all 10 spots for the strongest growth in house values, with all suburbs delivering growth of 30% or above over the year.
For unit markets, Brisbane (5), Perth (4), and Adelaide (1) rounded out the top 10 for largest gains across the capital cities, with units in Perth's Armadale surging 45.6%.
The weakest performers among the capital city house suburbs for value growth were dominated by Melbourne (6) although the top spot of the list was taken out by Millner in Darwin, falling -11%. Similarly, the top 10 worst-performing unit markets were (almost) all found in Melbourne (9).
Venus Bay (Regional VIC) was the weakest house market nationally, with values down -15.4%, while Sunshine units in Greater Melbourne had the biggest drop in unit values at -13.8%.
Most affordable suburbs
The top 10 list of "affordable" suburbs for houses in the capitals were concentrated in Darwin (6), with Moulden's median value coming in at $392,008, along with Brisbane (2) and Hobart (1) and ACT (1).
Darwin also dominated the list for the most affordable unit markets in the capitals (8), with Bakewell's median value of $278,855.
Nationally, Norseman in the Goldfields-Esperance region of Western Australia topped the list of affordable house markets with a median value of $80,289, while across units Laguna Quays in Queensland came in at number one with a median value of $142,689.
Best performing rental markets
Rent values in Australia remained high in 2024, but even here the strain on household demand was reflected in softer rental growth rates. Annual growth in rent values slowed to 5.3% in the year to November, down from 8.1% in the year prior and a high of 9.6% in the year to September 2022.
Ms Owen said this could be attributed to the high cost of living pressures as well as reduced net overseas migration.
Nationally, Noosa Heads houses had the highest rent growth in the year at 23.7%. Geraldton in WA topped the list for unit rent growth at 21.5%. Across the capital cities, Perth also dominated the list of suburbs with the highest house rent growth in the year to November (7) with Middle Swan in Greater Perth up 17.0%. Perth unit markets also made up 8 of the top 10 unit growth markets, led by a 19.5% lift across Melville.
2024 market outlook: A continuation of the drag on buyer demand?
Looking ahead, Ms Owen said the start of 2025 could likely see a continuation of the drag on buyer demand exhibited towards the end of 2024, including a small decline in national home values in the first part of the year.
"A change in the official cash rate target could then mark an inflection point, increasing demand in the second half of the year," she said, pointing to analyst expectations for a ‘shallow’ rate-cutting path, with the forecasts across the big four banks placing the cash rate between 3.1% and 3.6% by the end of 2025."
As of November, the RBA has a base assumption of mid-2025 for the three-percentage reduction, along with NAB, ANZ and Westpac.
CoreLogic estimates that an affordable dwelling purchase for the median income household in Australia under the current average owner occupier rate (6.27%) would be around $507,000 – a far cry from the current median of $813,000. Even in the event of average mortgage rates reducing by 125 basis points (assuming the cash rate reduces to 3.1%, and reductions are passed on to mortgage rates in full), this only takes an affordable purchase price to $581,000.
The slowdown in rent growth seen in 2024 is also expected to continue in 2025, as rental demand continues to be squeezed amid high cost of living constraints. Should the unemployment rate trend higher in 2025, renting households may also be disproportionately affected by job loss, where renting households tend to skew towards younger, lower-skilled workers on more precarious employment arrangements.
However, Ms Owen said there are also tailwinds for households that could boost buyer and renter demand in 2025.
"Wages growth, while slowing, is well above the pre-COVID, decade average, at 3.5% in the year to September."
"Real household income has been boosted by the Stage 3 tax cuts, despite this boost to income seemingly being saved by households for now. Real household income growth is expected to pick up further as inflation continues to ease in 2025."
"While market conditions are broadly expected to improve off the back of a cash rate reduction in 2025, there will still be considerable diversity in housing market performance."
She said Melbourne and Hobart may see a subtle rise in value off the back of increased affordability, while the demand shock that has created strong price growth in the likes of Perth and Adelaide may start to ease.
New housing construction also remains subdued across the country, which is expected to continue into 2025, and may help to keep a floor under home values.
For suburb-level performance metrics across each capital city and regional area as well as additional commentary, download the complete 2024 Best of the Best Report from corelogic.com.au.
Download Best of the Best 2024
CoreLogic Australia