Housing Fever

The Australian housing market exhibited mixed trends in the final quarter of 2024. House prices continued their upward momentum in Brisbane, and Adelaide, whereas Melbourne, Canberra, Hobart, and Darwin saw stabilization or mild corrections. Sydney and Perth experienced steady growth in price levels, albeit at a slightly slower pace compared to the previous quarter.

Price-to-rent ratios showed a divergence in trajectories, with Brisbane, Adelaide, and Perth maintaining an upward trend and Hobart showing a slight increase. Sydney, Melbourne, and Darwin, on the other hand, experienced further declines, indicating a rising rental index in these cities. Canberra remained neutral.

The housing fever index mirrored movements in the price-to-rent ratios, with Brisbane, Adelaide, Perth, and Hobart continuing to show strong demand signals. Despite rising house prices, Sydney’s fever index declined, suggesting more balanced housing market conditions. Both Melbourne and Darwin saw further declines in their fever index, while Canberra remained neutral.

New Zealand’s housing market remained relatively steady, with only minor fluctuations in house prices and price-to-rent ratios. Wellington’s fever index continued to show some ongoing volatility, albeit at a modestly elevated level. Otago maintained its downward trend, while other regions exhibited stability, similar to the previous quarter.

Overall, the housing market in both Australia and New Zealand closed 2024 with regional variations, with growth concentrated in select markets and signs of cooling in others.

The Australian housing market has in the main been steady since last quarter. House prices have stabilized in Melbourne, Canberra, Hobart, and Darwin or resumed upward drifts of varying strengths in Sydney, Brisbane, Adelaide, and Perth. The price-to-rent ratios fall into three categories: trending upward in Brisbane, Adelaide, and Perth; remaining flat in Sydney and Hobart; and declining in Darwin and Melbourne.

The housing fever indexes mirror the trends in price-to-rent ratios, with Adelaide, Brisbane, and Perth moving upward, Melbourne trending downward, and Canberra remaining leveraged. However, unlike the price-to-rent ratio, Sydney’s fever index is also downward trending, indicative of stronger housing market fundamentals in Sydney.

As in the previous quarter, house prices and price-to-rent ratios in New Zealand markets show only minor fluctuations. Wellington’s fever index has seen some variation, remaining slightly elevated compared to other markets. Other regions are following similar patterns to those of last quarter, with Otago continuing its downward trend, while the remaining markets remain stable.

Since 2023, house prices across all markets have either stabilized (Melbourne, Canberra, Hobart, and Darwin) or resumed an upward trend (Sydney, Brisbane, Adelaide, and Perth). However, unlike house prices, rising rents have caused the price-to-rent ratios to decline in Melbourne and Darwin, while in Sydney, the ratio has remained flat. These data reflect the impact of changes in housing market fundamentals.

The upward trend in the fever index for Brisbane, Adelaide, and Perth shows no signs of slowing down, as these markets continue to experience strong growth. In contrast, the fever indices for Hobart and Canberra have stabilized, reflecting stronger market fundamentals. Meanwhile, Sydney’s fever index has leveled out, indicating that the city’s market is holding steady.

As in the last quarter, we observe only minor fluctuations in house prices and price-to-rent ratios across the New Zealand markets, except for a sudden drop in the price-to-rent ratio in Otago, driven by rising rents reflecting a change in market fundamentals in the Otago region.

Interestingly, compared to the last quarter, Wellington’s fever index has reversed direction and started to trend downwards. The other markets are behaving in a similar way to the previous quarter:  Otago continues its downward trend, while the remaining regional markets remain stable.