CoreLogic Housing Update – Feb 2025

CoreLogic’s national Home Value Index posted a 0.3% rise in February, breaking the short and shallow downturn that lasted just three months and dragging the national measure of home values - 0.4% lower. The February rise was subtle, but broad based, with every capital and ‘rest-of-state region except Darwin (-0.1%) and Regional Victoria (flat) recording a monthly rise in values. 

• Melbourne and Hobart led monthly The largest month- on-month change across the capitals was recorded in Melbourne and Hobart (both up +0.4%) where home values have previously been among the weakest. For Melbourne, the lift breaks a streak of ten consecutive months of falling home values. 

• The mid-sized capitals of Brisbane, Perth and Adelaide have lost their mantle as the strongest growth markets. With a monthly change of 2% to 0.3%, the mid-sized capitals were outpaced by Melbourne and Hobart. Adelaide and Brisbane are still leading rolling quarterly growth trends, up 1.2% and 0.9% respectively, but Perth’s value growth has slowed more sharply with downward revisions over recent months dragging the quarterly change to just 0.3%. 

• The return to growth across Sydney and Melbourne is being driven by the more expensive end of the market, with upper quartile house values leading the monthly gains in both cities after high-value markets recorded the sharpest This stronger performance is in line with earlier research from CoreLogic, which highlighted that premium housing markets in Sydney and Melbourne have historically been the most sensitive to rate cuts. 

 CoreLogic’s research director, Tim Lawless, said the improved housing conditions have more to do with improved sentiment than any immediate improvement in borrowing capacity. “Expectations of lower interest rates, which solidified in February, look to be flowing through to improved buyer sentiment. Along with the modest rise in values, we have also seen an improvement in auction clearance rates, which have risen back to around long-run average levels across the major auction markets. Counts of new listings coming to market across the combined capitals were tracking -4.7% lower than a year ago over the four weeks to February 23, and -1.5% below the previous five-year average. Although total advertised supply levels are almost 1% higher than a year ago, listings remain -7.9% below the previous five-year average and the reduced flow of fresh stock to market could be supporting some upward pressure on prices, especially if buyers are becoming more active amid higher sentiment and lower rates. National rents rose by 0.6% in February, the strongest monthly gain since May last year, but well below the 0.9% rise recorded in February last year or the 1.2% gain seen in February 2021 at the height of the rental boom. “Rental trends are highly seasonal, and the pickup in rental growth through the first quarter is likely driven by this seasonal phenomenon,” Mr Lawless said. “The broader trend points to a slowdown in rental growth as households become larger and net overseas migration normalises.” Gross rental yields have lifted a little over recent months, rising from a recent low of 3.65% nationally to 3.72%. This is the result of rents rising at a faster pace than house values since the value trend found a peak in October last year. 

 Although housing markets look to have moved past the recent downturn, the trends from city to city and region to region remain diverse.  The rate-cutting cycle is very fresh and is likely to be drawn out. Lower mortgage rates are clearly a net positive for housing markets, supporting a rise in borrowing capacity and serviceability assessments, but interest rate settings are likely to remain in restrictive territory for some time yet.  “Until home loan serviceability improves more substantially, it’s hard to see housing markets moving into a material growth trend,” Mr Lawless said.   A further lift in consumer sentiment would support purchasing activity. Historically, there has been a close relationship between measures of consumer sentiment and the volume of home sales. We have already seen a substantial rise in sentiment readings over the past 6 months or so, although the past few months have seen the trend flatten. If sentiment returns to more optimistic levels, along with the subtle improvement in serviceability provided by rate cuts, it's likely we will see buyer activity lifting.  A rise in demand for housing from lower interest rates and a sentiment boost will be partially offset by slower population growth. After peaking in the first quarter of 2023, the Centre for Population expects net overseas migration to reduce further as overseas arrivals continue to moderate alongside a pickup in departures as visas from the temporary surge in migrants expire. Less migration is likely to flow through to a further easing in rental demand, and, over the medium term, reduced demand for home purchasing.  A buyer’s market, but not everywhere. Based on listing counts to February 23, inventory levels remain elevated in Sydney (+6.9%), Melbourne (+3.9%), Hobart (+25.2%) and ACT (+6.8%) relative to the previous five-year averages. These are also the regions where prices remain below their recent cyclical highs and where buyers might be able to find a bargain, at least relative to peak levels.  Buyers looking to Perth (-28.0%), Adelaide (-33.9%) or Brisbane (- 21.5%) are still facing a dearth of homes available for sale.  Low levels of newly built housing should also deliver some support to housing values in 2025. Residential construction activity has seen a subtle rise across the detached housing sector, but multi-unit dwelling commencements remain well below average, with little evidence of a pickup in activity due to feasibility challenges amid high construction costs and tight labour markets.  Sourced from RP Data