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Australia’s house prices may have downturned but home values are expected to bounce back soon, according to CoreLogic.
While recent data from property analytics company CoreLogic has revealed that Australian house prices fell 0.1 per cent in December 2024 – the first time property prices have fallen in nearly two years – the property price downturn is only expected to be short-lived, according to the company.
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After 21 months of growth that pushed values up 14.3 per cent, CoreLogic’s national Home Value Index (HVI) revealed that Australia’s property growth cycle peaked in October 2024, after having slowed from June 2024.
CoreLogic has said in its latest Property Pulse (January 2024) that even though a cyclical downswing in the housing market is likely to occur in early 2025, it may not be large or long-lasting.
Indeed, the property data and analytics firm said that in seasonally adjusted terms, values actually rose 0.1 per cent in December.
What’s driving the downturn?
Stalling income growth and historically high house prices have slowed housing demand.
“The downturn is being caused by the widening gap between income, borrowing capacity and home values,” CoreLogic’s head of research, Eliza Owen, said.
That’s being exacerbated by slowing economic growth and higher-for-longer interest rates, she said.
The decline in home values has coincided with a seasonally slower period for the property market, when value changes are usually slightly weaker.
The downturn is also being driven by a relatively small number of markets, which have an outsized impact.
The national value decline is mainly due to Sydney and Melbourne, which account for roughly 40 per cent of Australian housing stock and 50 per cent of Australian housing value.
The HVI measures total value change without adjusting for market size, so movements in Sydney and Melbourne have a relatively large impact on the headline figure.
However, while the downturn is largely driven by Sydney and Melbourne so far, the general market trend is still experiencing a slowdown in most regions, CoreLogic said.
Why a downturn won’t last
CoreLogic believes a downturn in housing values is likely to be “shallow and short-lived”.
“At the national level, home value declines tend to be shorter and smaller than periods of increase,” Owen said.
A downturn may be tempered by sellers who can withhold the sale of their homes until values rise, effectively restricting supply during periods of price declines.
Positive tailwinds for property demand in 2025 should also protect the market from longer-term price drops.
Income growth should help increase buyer demand while interest rate cuts would boost borrowing capacity, CoreLogic said.
A shortage of homes relative to the population and a squeeze on the delivery of new housing amid weak capacity in the construction sector should also hold up prices, CoreLogic said.
However, despite predicting a short-term downswing, CoreLogic said that “it’s hard to see any material growth returning to housing values, at least at a macro level, until housing affordability and loan serviceability improves more substantially”.
The forecast echoed similar sentiments from property listings platform Domain, which recently forecast that 2025 would result in a two-speed year, with a subdued first half followed by a dynamic second half (depending on the timing of rate cuts).
Aggregation group LMG similarly foresees market confidence to rise, as strong employment rates support housing demand while improving wage growth will give home buyers a boost.
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