October Market Smart: Return of the Buyers’ Market
Key Takeaways
- National Market Slowdown: October saw a national 0.3% increase in dwelling values, continuing 21 months of growth, though the overall pace has slowed considerably. Annual growth eased to 6.0%, down from a peak of 9.7% earlier in the year.
- Sydney’s Decline Begins: Sydney’s dwelling values dipped by 0.1%, marking the first monthly decline since January 2023. The drop was sharper in Sydney’s upper quartile, while the lower quartile showed minor gains, highlighting a trend towards more affordable segments.
- Perth and Adelaide Continue to Lead: Perth and Adelaide outperformed other capitals with monthly gains of 1.4% and 1.1%, respectively, though these markets are showing signs of cooling from mid-year highs.
- Increased Listings Impact Selling Conditions: Advertised stock increased by 12.7% in capital cities since the end of winter, with Sydney and Melbourne both showing listings well above the five-year average. This is easing urgency in buyer behaviour and creating more favourable buying conditions.
- Rental Growth Slows Significantly: National: National rents grew only 0.2% for October, with unit rents even declining in cities like Sydney, Melbourne, and Canberra. The annual rental growth dropped to 5.8%, its lowest since April 2021.
Current Market Trends
October’s housing market continued to display signs of cooling, with only a modest national growth in values. Although this sustained growth highlights some market resilience, the slowdown reflects shifting dynamics as stock availability grows and buyer urgency wanes. Key cities like Sydney are now seeing declines, while mid-sized capitals like Perth and Adelaide, despite remaining top performers, are experiencing diminishing monthly gains compared to earlier in the year.
The October data further highlights a growing divergence between capital cities and regional markets. While combined capital values edged up by only 0.2%, regional markets performed slightly better with a 0.6% gain, reflecting stronger demand for properties outside of metropolitan areas. The appeal of regional areas continues to be supported by affordability advantages and lifestyle preferences, as many buyers seek lower-cost options or lifestyle-driven relocations. However, as affordability pressures mount, regional markets are beginning to mirror some of the cooling trends seen in the capitals, though at a slower rate. Despite softer conditions in capitals like Sydney and Melbourne, the smaller capitals of Perth, Adelaide, and Brisbane still exhibit moderate growth, underlining their resilience compared to more expensive, larger cities. The regionals may face a slower price deceleration, but as urban stock levels increase and demand cools, even these markets are showing signs of reduced momentum.
October saw a marked slowdown in rental growth, with national rents increasing by only 0.2%—a sharp contrast to the faster pace observed earlier in the year. This deceleration in rental growth is partly due to softer conditions in unit rentals, especially in major cities like Sydney, Melbourne, and Canberra, where unit rents have been in decline. Annually, rental growth has now eased to 5.8%, the lowest since April 2021, providing some relief to tenants who have faced sustained rent hikes in recent years. The moderation is likely influenced by stabilising migration trends and a shift towards larger household formations, which reduce rental demand. Additionally, increased investor activity has been gradually boosting rental supply, adding to the easing in rental pressures across the country. This trend may continue as migration stabilises and more rental properties come to market.
Source: CoreLogic, 2024
Rental yields reveal a distinct divide between capital cities and regional areas. Capital cities recorded an average gross rental yield of 3.5%, while regional areas continued to offer a more attractive yield at 4.4%. The higher yields in regional markets reflect their lower property values relative to rental income, which appeals particularly to investors seeking better returns. Meanwhile, yields in capital cities have faced downward pressure, especially as unit prices stabilise or decline in markets like Sydney and Melbourne. Although lower yields in capitals might deter some investors, this trend could attract additional interest in regional markets, where yields remain comparatively robust. If rental growth continues to slow nationally, capital city yields may stabilise further, while regional yields may gradually narrow as demand pressures equalise across the market.
Things to keep an eye on
- Inflation
Popular alternate measures of CPI remain well below ABS estimates, adding to the positive signs for inflation’s trajectory.
- New Dwelling Inflation
In all cities apart from Perth, new dwelling inflation has notably declined.
- New Listings
Rates of listings continue to surge, demonstrating a clear correlation with the moderating price growth of late.
- Construction
Construction rates and indicators for the industry continue to look particularly bleak, particularly in light of target rates of construction.
At Search Party Property, we specialise in developing tailored investment strategies and will work with you to come up with a suitable plan of attack. We also regularly assess your strategy ensuring that it is fit for purpose and delivering the desired results.
