Australia’s spring housing market has stalled, with home sales down 20.9% annually and properties taking longer to sell as higher interest rates and weak buyer confidence suppress demand.
Interest Rates and Weaker Demand Take Their Toll
Based on Cotality’s October Housing Chart Pack, around 39,747 homes were sold nationwide in September, a decrease of 20.9% from the same month a year prior. The median duration for a property to sell extended to 41 days, up from 26 days the previous year.
Even though the spring selling season is typically busy, new property listings were 7.9% fewer than last year and nearly 12% lower than the five-year average. However, total advertised stock grew by 19.1%, suggesting homes are staying on the market longer than buyers are purchasing them.
The Reserve Bank’s October rate increase, the fourth this year, further limited borrowing capacity. The cumulative hikes since February have lowered a median-income household’s borrowing power by an estimated $90,000, or 9%.
Buyers are facing not only reduced borrowing power but also higher mortgage repayments and the risk of further price drops, causing some to hesitate even if they have the funds to buy. National dwelling values dropped 3.7% over the September quarter, while capital city vendor discounts reached 4.4%, a five-year high.
Auction results provide further evidence of weaker buyer demand, with the four-week average clearance rate falling to 48.3%, compared with 64.4% in late February.
Brisbane, Perth and Sydney See Sharp Deterioration
The smaller capital cities of Brisbane and Perth, previously among the nation’s most competitive markets, have experienced some of the most pronounced changes in selling conditions. Total advertised listings increased 60.4% in Brisbane and 64.7% in Perth over the past year, while median selling times rose from 17 to 38 days in Brisbane and from 11 to 26 days in Perth.
Dwelling values in both capitals fell 4.7% over the September quarter, though annual growth remained positive at 5.9% in Brisbane and 10.1% in Perth, reflecting gains recorded earlier in the year.
Sydney recorded the largest quarterly decline in dwelling values, down 4.9%, taking values 8.6% below their February peak. Melbourne values fell 3.4% over the quarter, while Darwin was the only capital to record growth, up 0.5%.
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The more recent figures show a market that’s become much more challenging for vendors, particularly those expecting to achieve the prices they might have expected to secure six or 12 months ago.
Regional dwelling values fell 1.9% over the September quarter, compared with a 4.3% decline across the combined capitals. Over the year, regional values were still 5.6% higher, while capital city values had fallen 1.8%.
Regional Markets Hold Up Better as Rental Growth Moderates
Regional sales activity has also proved more resilient, declining 1.6% over the year compared with a 9.1% fall across the combined capitals. Regional markets had generally been less exposed to the affordability pressures affecting capital city buyers, with property values typically lower across regional Australia, giving buyers more options within their budgets.
Meanwhile, rental growth has moderated, providing some relief for tenants following several years of substantial increases. National rents rose 0.5% over the September quarter, the slowest quarterly growth since December 2024, while annual rental growth eased to 5.5%.
Gross rental yields increased to 3.85% nationally, their highest level since August 2019, as dwelling values declined.
Spring Outlook Depends on Buyers Returning
Market conditions over the remainder of the year will depend heavily on upcoming inflation data and the RBA’s November interest rate decision, with any further increase likely to weigh on already weak consumer confidence.
We would normally expect housing activity to pick up through October and November, but with four interest rate rises already this year and the possibility of more to come, there are likely to be substantial headwinds for the market through to the end of the year.
Lower property prices will eventually help improve affordability, but that benefit is being offset by higher borrowing costs. Until households have more certainty about interest rates and their financial position, it is difficult to see a sustained recovery in buyer demand.