$1 million house club grows as values rise
Australia’s housing affordability crisis shows no signs of abating, with the average house price in four capital cities rising above $1 million for the first time.
Listing figures for January show a 0.8 per cent increase in house values across the country, driven by a sharp decline in the volume of properties for sale and an increase in the number of people entering the property market to escape high rents.
The 0.8 per cent increase, which followed a 0.6 per cent increase nationwide in December, propelled Perth into the $1 million club, joining Sydney, Brisbane and Canberra.
Following a decline in December, house values in our two largest cities rose last month: Sydney by 0.3 per cent and Melbourne by 0.2 per cent. Sydney’s median home value is now almost $1.6 million, and in Melbourne the figure is $989,356.
The figures came ahead of the Central Bank’s monetary policy committee meeting, which starts on Monday. Financial markets put the probability of a rate hike on Tuesday at 70 percent.
Values in Melbourne and Sydney are growing much more slowly than in the smaller capital cities. Perth’s median home value rose a further 1.9 per cent to over $1 million in December. Last year Perth’s median home value increased by 18.4 per cent.
A similar story is playing out in Brisbane, where the median house value hit a record $1.15 million in January; This is up 15.1 percent over the past 12 months.
Adelaide’s median rose 1.3 per cent to an all-time high of $972,435. In Canberra, the average value increased by 0.5 per cent to $1.03 million.
One important factor is the shortage of homes on the market. Cotality estimates that the number of homes advertised for sale is down 19 percent compared to the same period last month.
Cotality research director Tim Lawless said while values were rising, momentum for further increases would be weakened by interest rates being high and the likelihood that many homes would be unaffordable.
“Despite the most unfavorable conditions on record in many cities, a recovery in cost of living pressures and the possibility of a rate hike as early as this Tuesday, we are still seeing a broad-based increase in house values,” he said.
“Continued capital gains reflect persistently low inventories in the face of above-average housing demand. However, we will see demand-side pressures gradually ease in 2026.”
“Affordability and serviceability constraints will likely naturally reduce demand, but there is also a strong possibility of renewed cost-of-living pressures and interest rates rising. There is also slowing population growth to consider.”
Despite efforts to increase the number of houses built across the country, low housing prices continue to bother the Albanian government. Over the weekend Prime Minister Anthony Albanese announced a $668 million housing package, including $300 million in water infrastructure to support 4000 new homes in Adelaide’s northern suburbs.
This was after Chancellor of the Exchequer Jim Chalmers said in an interview with economics Nobel Prize winner Joseph Stiglitz: Monthly magazine said the cost of housing was a “defining part” of the intergenerational challenge facing the country.
Cotality reported a slight increase in the national rental vacancy rate, rising marginally to 1.7 per cent last month.
Lawless said the vacancy rate in all capital cities except Canberra was below long-term averages. Rents have increased by more than 42 percent nationwide in the last five years.
These sharp rent increases caused many renters to try to buy homes, which put pressure on the overall market, especially lower prices.
Lawless said values for the lower quartile of the market increased 1.3 percent in January, while the upper quartile increased 0.3 percent.
“This is where first home buyers, investors and increasingly mainstream demand are most concentrated,” he said.
In Melbourne, unit values decreased by 0.2 percent in January and increased by 2.7 percent compared to last year, reaching $639,145. Canberra’s average unit value has increased by just 0.4 per cent since January last year to $592,009.
The average value of homes in Perth increased by 20.1 percent last year to $699,814. In Brisbane, it increased by 18.3 percent to $824,764.
AMP chief economist Shane Oliver said the question of a rate hike on Tuesday looked more like a 50-50 chance, given the strength of the Australian dollar and evidence in recent inflation data that underlying price pressures were starting to ease.
“If there is an increase of 0.25 percent, we will see it as a whole,” he said.
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Shane Wright is senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: X or email.
