Hot or not? Where property markets are heating up and cooling down

rice growth has reignited in some markets after years of stagnation, but in other parts of the country the heat is coming out.

Interest-rate cuts have sparked renewed price growth across Australia, and some previously unloved property markets are now taking centre stage. High interest rates for the past few years have put increased focus on Australia’s more affordable capitals and regions, where price growth has led the nation.

But with interest rates now heading down, buyers are returning to cities and regions where price growth has lagged and properties have become relatively more affordable.

Where housing markets are heating up

Comparing quarterly and annual property price growth can reveal where price growth is accelerating, and where markets may be cooling down.

The data shows that a recovery is well underway in previously-underperforming capitals such as Darwin, Hobart and Canberra, where price growth lagged the other capitals.

These cities are now recording steady price growth, with Darwin the strongest, up 2.8% over in the past three months and 6.1% in the past year. In Melbourne, prices have stabilised and begun to recover in several key areas after the city languished behind the other capitals since the pandemic. The strongest quarterly house-price growth was recorded in the inner city (up 3.5%) and north west (up 2.2%), while unit growth was strongest in the inner city (up 5.5%), south east (up 3.3%) and north west (up 2.8%). The data covers price growth for SA4 regions, which are geographical areas defined by the Australian Bureau of Statistics (ABS) with a minimum population of 100,000 people.

REA Group senior economist Eleanor Creagh said Melbourne’s turnaround was a result of its relative affordability and stabilising sentiment after price growth lagged the other capitals in the past five years. “Melbourne is now catching up after a sustained period of underperformance relative to other capitals – a common pattern in cyclical housing markets,” she said.

“The recent rate cuts and prospects of further easing have improved borrowing capacity and boosted buyer confidence, providing a catalyst for a gradual rebalancing.” House prices are up about 2.8% on the Mornington Peninsula in the past three months, which comes after a slower period that followed the pandemic boom. Bendigo recorded house-price growth of about 2.3%.

In Sydney, the inner west, south west, Parramatta and Sutherland regions clocked the fastest quarterly growth for houses, while unit prices grew fastest on the northern beaches.

Sutherland-based real estate agent and Pulse Property Agents director Ben Pike said many buyers were fearful that prices would jump quickly as a result of falling interest rates and had become more competitive.“People still have 2021 in their memory when the market jumped up about 25%,” he said.

“Week on week we’ve seen more engagement with listings online, more enquiries, and open home numbers have tripled.”

“Instead of having one or maybe two good buyers per property, you’re looking at five or six.”

“The most competitive price range for freestanding homes is between $1.5 million and $2.5 million.” The Illawarra region, which spans from Sydney’s southern boundary all the way south to Gerringong, notched an almost 2% uplift in the past three months, with values having grown faster than Sydney overall in the past year.

But the Newcastle and Lake Macquarie region was the standout in the past three months, with its 3.6% house-price growth making it the strongest-performing region in Australia on a quarterly basis. Newcastle real estate agent and Salt Property director Lyndall Allan said buyers had long been drawn to the city from other cities such as Sydney and Canberra for the laid back coastal lifestyle, but demand increased when interest rates were cut. 

“We always have a steady interest from people wanting to move to Newcastle but of late we have a much bigger influx of investors,” she said.

“Rentals are very strong here so it makes good investment sense.”

Where housing markets are cooling down

At the other end of the spectrum, a number of regions have recorded property price declines over the past quarter, or significantly slower growth than in previous months.

Many of these regions also happen to be among the strongest-performing property markets in the past few years, with prices doubling in just five years in some cases. Ms Creagh said a slowdown in price growth may reflect many factors such as seasonality, shifting demand or affordability challenges after rapid price jumps.

“In many cases, slower growth simply signals the market is stabilising, not reversing, meaning prices may plateau or grow at a slower pace, rather than fall,” she said.

“However, if slowing growth is accompanied by accumulating listings, a downturn in the economic cycle, or demand and sentiment shocks, it may foreshadow a more sustained downturn.” Parts of Perth were topping the charts for price growth this time last year, but the rate of annual growth across the city has more than halved since then. 

In Perth’s north east, house prices declined by 0.8% in the past three months, while in Mandurah, the 0.7% quarterly increase in house prices was much slower than the same time last year. Unit prices in the Mandurah region declined by 0.8% over the quarter. House-price growth in Bunbury has also stagnated, with values flat over the quarter.

The slowdown in price growth in many previously-booming regions indicated conditions were normalising, Ms Creagh said.

“Markets like Mandurah and Bunbury have recorded persistently strong growth in recent years, driven by affordability and lifestyle appeal, internal migration from capital cities and investor activity chasing yield and price growth,” she said. “The recent slowdown in these regions is consistent with the late-cycle dynamics – after years of above-trend growth, price levels have pushed closer to affordability ceilings and demand has eased.

“In effect, these areas are normalising after an exceptional run, not necessarily entering downturns, but shifting into a lower-growth phase.” In NSW, unit prices fell by about 1.1% in Sydney’s east, and about 1.5% on the Central Coast.

Melbourne’s west recorded a 2% drop in unit prices, with prices now 7.1% lower than a year ago.

House prices are down 1.7% over the past three months in the Mackay - Isaac - Whitsunday region of Queensland, which comes after a significant increase in values last year. 

Townsville, which still remains the nation’s strongest region for annual house-price growth, has recorded slower quarterly growth in recent months.  Prices rose a respectable 2.3% in the past three months, but this is about half the rate of growth compared with a year ago, when prices were really taking off.

“Growth has decelerated slightly from peak levels, moving past its growth peak but still performing well in relative terms,” Ms Creagh said.

Townsville real estate agent Jools Munro of Explore Property Munro & Co said elevated pricing for houses meant interest investors, who had contributed to strong demand, were becoming less active.

“We are definitely seeing a decrease in the number of interstate investors,” she said.

“We’ve still got a lack of supply to keep the pressure on the value of homes, but certainly we are starting to see our days on market for houses blow out.”

“But we are seeing more owner occupiers buy our houses so it's good news for our locals.”