National home prices rose in September, new data shows, but some of the heat continues to come out of the housing market as more owner-occupiers and investors consider selling.

National house prices increased 0.4 per cent in the first month of spring and 6.7 per cent over the year, according to the latest study from CoreLogic.

It shows the median value of housing nationally now stands at $807,110.

The slowdown in the pace of growth comes as more home owners, some struggling under higher interest rates, look to sell.

The flow of new listings coming onto the market was tracking 3.2 per cent higher than a year ago nationally to be 8.8 per cent higher than the previous five-year average for this time of the year.

But the rise in listings in spring comes amid weaker selling conditions.

Auction clearance rates have wound back to the low 60 per cent range across the combined capital cities, which is about 4 percentage points below the decade average.

In Sydney, house prices were up 0.2 per cent in the month, 0.5 per cent in the quarter and 4.5 per cent over the year. The median dwelling value in Sydney is now at $1.2 million.

While Sydney home values have continued to rise, the quarterly increase was the lowest growth result since the three months ending February 2023.

In Melbourne, values were down 0.1 per cent in the month, 1.1 per cent over the quarter and 1.4 per cent over the year. The median dwelling price in Melbourne is at $777,390.

CoreLogic head of research Eliza Owen said weaker migration trends and the recent increase in land tax for investment properties in Victoria had taken some heat out of the market.

“Victoria, more broadly, has also seen more dwelling supply than any other state or territory in the past two decades,” Ms Owen noted.

‘The buyer pool is getting a little bit smaller’

Other states to record slight declines included Canberra, which was down 0.3 per cent for the month and 0.9 per cent over the quarter.

Hobart was also down 0.4 per cent for the month and 0.9 per cent in the quarter, while Darwin, which was up 0.1 per cent for the month but down 0.7 per cent in the quarter, also saw slight declines.

But values rose in Perth, which was up 1.6 per cent in the month and 4.7 per cent in the quarter, though the rise was far slower than previous quarters.

Gains were also evident in Adelaide, which was up 1.3 per cent in the month and 4 per cent over the quarter, and Brisbane, which was up 0.9 per cent in the month and 2.7 per cent in the quarter.

“This means that there aren’t as many buyers for the amount of stock that’s on the market.

“And for the buyers that are there, they might find they have a little bit more negotiating power in the transaction.”

Rental growth slows due to easing overseas migration

Price rises in the rental market have also slowed.

The national rental index increased by just 0.1 per cent over the September quarter, the smallest change over a rolling three-month period in four years.

Ms Owen said the slowdown in rental growth was due to easing net overseas migration, with ABS data showing net overseas migration fell by 19 per cent from the record highs in the first quarter of 2023.

The March quarter of 2024 saw 133,800 net overseas migrants arrive in Australia, 31,700 fewer than a year earlier.

“We’ve started to see things like a normalisation in net overseas migration and more of a demand response, in the sense that share houses might be re-forming again, indicated by an increase in average household size,” Ms Owen said.

The immediate outlook for housing markets was further growth in values, “but the rate of those increases will inevitably slow down,” she said.

“That’s because we haven’t seen a reduction in the underlying cash rate.

“Borrowing capacity is still pretty constrained. Affordability is becoming more constrained.

“And even some of the strongest-performing markets over the past few months have seen a slight slowdown in the growth rate, like Perth, for example, where we’ve seen a pretty substantial reduction in the quarterly value increases.”

Greg Brydon, an auctioneer at Ray White, said buyers were back in the market this spring but they were holding back.

“But now with talk of rates potentially being cut [next year] — it seems to have given some buyers some confidence to re-enter the market.”

Ms Owen said interest rate cuts slated for later this year, or early next year, would “provide a boost to borrowing capacity and should help to support a further lift in confidence to make high-commitment decisions like buying a home”.

Australia’s housing market is creating wealth like never before.

Here’s a stocktake of how things are going.

The money-making machine

In the past 10 years (June 2014 to June 2024), the total value of our residential dwellings has risen from $5.1 trillion to $10.9 trillion (+$5.78 trillion).

Since June 2020 alone, the value of our dwellings has increased by $3.6 trillion.

According to CoreLogic’s recent quarterly Pain and Gain Report, Australia’s property owners pocketed a record-breaking median nominal profit of $285,000 from resales in the June quarter of this year.

Nationally, the median nominal profit from house sales was $340,000 and for units it was $185,000 (both records).

But it was starker for individual suburbs.

For the Pain and Gain report, released this month, CoreLogic analysed roughly 91,000 resales in the June quarter.

It says the record-breaking gains home owners made from selling their properties was partly a result of national housing values hitting fresh record highs every month since November last year.

It says the record gains could also reflect the fact that many sellers had the ability to properly time their resale for profit “given relatively stable conditions for mortgage serviceability.”

But when breaking the data down into local government area regions (LGA), the report shows sellers in some regions of the country have been raking in the profits.

In Sydney, sellers enjoyed the highest median nominal gains from resale of the capital city markets in the June quarter, at $353,000 across all dwellings, and a substantial $615,000 across houses.

For some individual LGAs, the median profit from resales was more than $450,000 — in the Hills district ($627,500), Hunters Hill ($627,500), the Northern Beaches ($550,000), Woollahra ($480,000), Waverley ($466,500), the Hawkesbury ($465,000), the Inner West ($460,000), the Blue Mountains ($458,000), and Wollondilly ($450,000).

The table below shows the median losses for loss-making sales (left-hand side, in orange), and the median profits for profit-making sales (right-hand side, in black), in Sydney’s LGAs.

Brisbane had the highest rate of profit-making resales among the capital cities in the June quarter, with 99.1 per cent of resales capturing a profit.

For individual LGAs, the median profit from resales was more than $300,000 in Redland ($388,500), Scenic Rim ($387,500), Brisbane ($345,000), Logan ($340,000), and Moreton Bay ($332,500).

In Melbourne, the rate of profit-making resales fell to 90.5 per cent in the June quarter, with almost one-in-10 sellers making a nominal loss from resale.

That included one-fifth of unit sellers.

But despite that relatively high rate of loss, the city still delivered the fourth-highest median gain from resales across the major cities at $306,000, behind Sydney ($353,000), Adelaide ($335,000), and Brisbane ($333,000).

Stagnant unit sales were the main culprit for the high rate of loss-making in Melbourne’s markets, with unit values sitting below a peak from June 2017.

For some individual LGAs, the median profit from resales was above $400,000 — in Nillumbik ($595,000), Bayside ($585,000), Whitehorse ($560,000), Manningham ($526,000), Mornington Peninsula ($477,000), Monash ($442,000), Boroondara ($415,000), Banyule ($413,500), Yarra Ranges ($404,170) and Knox ($401,500).

In Perth, the rate of profit-making from the resale of homes hit its highest level since mid-2014.

CoreLogic says Perth has seen an “extraordinary turnaround in the rate of profitability” since the pandemic period.

More favourable internal migration trends, an upswing in the resources sector and strong subsequent housing demand has seen the rate of loss-making on sales dive from 48.3 per cent in the June quarter of 2020 to just 4.6 per cent four years later.

Since the start of the pandemic in March 2020, Perth home values have seen the highest increase of any capital city market, up 72.5 per cent.

The rapid rise in profitability means Perth’s home-owners are holding onto their homes for much shorter periods. The median hold period (before re-selling a property) was almost 16 years at the start of 2020, but that has dropped to 9.8 years.

The median profit for properties re-sold in Cottesloe in the June quarter was $763,000.

The median profits for resales in Nedlands ($490,000), Joondalup ($377,750), Melville ($388,000), Fremantle ($321,000), Kalamunda ($310,000), Mundaring ($295,000), Rockingham ($283,500), Serpentine-Jarrahdale ($280,000), Armadale ($280,000), were above $275,000.

The results for Adelaide, Hobart, Darwin, and the ACT can be found in CoreLogic’s report.

Average household size trending down

In May this year, the Reserve Bank of Australia’s chief economist, Sarah Hunter, delivered an important speech, “Housing Market Cycles and Fundamentals.”

She said the underlying demand for housing is “fundamentally driven” by the size of our population and the number of people that live (on average) in each dwelling.

So how big is our population?

According to Bureau of Statistics data, our estimated resident population has increased by 3.72 million people (23.4m to 27.1m people) in the past decade.

Our population has been growing by an average of 30,968 people a month (371,620 people a year) since early 2014.

During the same period, the total number of dwellings in Australia has increased by 1.8 million (9.36 million to 11.21 million).

We’ve been building an average of 15,000 dwellings a month (180,000 a year).

That’s a fraction more than two people for each new dwelling.

But significantly, Ms Hunter said the average number of people living in each household in Australia has been trending lower for decades, from around 2.8 in the mid-1980s to around 2.5 today.

“This may sound like a small change,” she said in her speech. 

“But, if for some reason average household size rose back to 2.8, we would need 1.2 million fewer dwellings to house our current population – no small difference.”

See a graph from her speech below.

Ms Hunter said part of the long-run decline in average household size in Australia can be explained by demographic factors.

“The aging of the population means we now have more older couples and singles living alone, and lower birth rates means that the average size of a family is falling over time,” she said.

“Working in the other direction has been an increase in the share of young adults living with their parents. This might be because more young people are going to university and living at home for longer, but it could also be due to affordability considerations. And this hints that demographics are not the only factor affecting household size – affordability affects people’s choices of where and who to live with,” she said.

She said demographic drivers of housing demand tend to be slow moving, but the pandemic period saw some dramatic shifts and acted as a catalyst for change.

It saw a big shift in people’s preferences towards more physical living space per person, “which is understandable when lockdowns forced us to spend more time at home,” and the shift to working from home reinforced the change.

Ms Hunter said housing supply does eventually respond to growing demand. 

But the speed and magnitude of the response can vary, and it’s determined by rental and housing prices, underlying construction costs and the time to design, approve and build, she said.

“In the meantime, prices and rents do the adjusting,” she said.

“The extent of this adjustment differs through each cycle and depends on the relative movements in demand and supply.”

And at this point of this particular cycle, the price adjustments have been generating record nominal profits for Australians selling their homes.