The Australian property market is experiencing a shift, with three major capital cities—Melbourne, Hobart, and Darwin—recording a decline in home values over the past quarter. This trend marks a notable slowdown, particularly as the overall growth momentum that characterized much of 2023 begins to fade. The market's performance varies significantly across different regions, with some cities still experiencing price increases, while others are seeing a retreat.

Key Highlights:

• Melbourne: Melbourne has seen a reduction in home values, largely driven by increasing housing affordability challenges. The combination of rising mortgage rates and slower wage growth has dampened buyer demand, leading to a softening in the market. Additionally, the oversupply of units in some areas is contributing to downward pressure on prices.
• Hobart: Hobart's property market, which had previously seen significant growth, is now experiencing a cooldown. A decrease in interstate migration and a slower pace of economic activity have led to a contraction in demand, causing a fall in home values. However, Hobart remains a highly sought-after location due to its lifestyle appeal, and long-term prospects are still positive.
• Darwin: Darwin's market has also taken a hit, with values declining over recent months. The city’s property market is particularly sensitive to changes in economic conditions, and a combination of slower population growth and weaker employment opportunities has contributed to the decline.
• Perth and Adelaide: In contrast, Perth and Adelaide are showing resilience, with home values continuing to rise. Perth benefits from strong population growth and an undersupply of housing, while Adelaide's affordability compared to other capitals continues to attract buyers. However, the sustainability of these trends is uncertain, particularly if interest rates continue to rise.

Investor Activity: Investor activity has remained robust, driven by the prospect of capitalizing on high rental yields. However, with rising interest rates, the return on investment is under pressure. Investors are becoming more cautious, focusing on markets with strong rental demand and potential for long-term capital growth.Rental Market: The rental market continues to be tight, with vacancy rates at record lows in many cities. However, the pressure on renters is intense, with rental prices increasing rapidly, particularly in regions where housing supply is constrained.

Outlook for 2024

The outlook for 2024 remains mixed. While some markets may stabilize or even see a recovery, others could face further declines if economic conditions worsen. Housing affordability will continue to be a significant challenge, particularly as mortgage rates remain elevated. Buyers and investors should approach the market with caution, considering both short-term risks and long-term opportunities.For more detailed analysis, visit the full report on CoreLogic.