Home values up, building approvals down
Rate cuts have ignited some activity in the market and as a result, home values have risen across the country. However, coinciding with this is a drop in building approvals, which could create issues for supply.
Cotality’s Home Value Index (HVI) for May saw a rise of 0.5 per cent. Every capital across the country saw an increase in values of at least 0.4 per cent throughout the month.
This puts annual HVI growth at 3.3 per cent. Despite the gains, it was the slowest increase since the year to August 2023.
The continued momentum is largely due to recent rate cuts, said Cotality’s research director Tim Lawless.
“The continued momentum we’re seeing across almost all markets is no doubt being fuelled by rate cuts – both those that have already happened, but also potential cuts in the coming months.”
“With interest rates falling again in May, we are likely to see a further positive influence flowing through to housing values in June and through the rest of the year,” Lawless said.
“This slower annual pace of growth reflects the easing in capital gains through the second half of last year, culminating in the modest fall in values over the three months to January 2025.”
The median value of properties across the country now sits at $831,288, with gross rental yield at 3.7 per cent nationally.
Broken down by city, the median house value is:
• Sydney: $1,203,295
• Melbourne: $791,303
• Brisbane: $917,992
• Adelaide: $829,695
• Perth: $813,810
• Hobart: $673,858
• Darwin: $525,770
• Canberra: $855,663
Dwelling approvals down
While house prices have picked up post rate cuts, dwelling approvals witnessed a decline in April.
Total dwellings approved fell 5.7 per cent to 14,633. Meanwhile, private sector dwellings, excluding houses, fell 19 per cent to 4,999.
Housing Industry Association (HIA) senior economist, Maurice Tapang, said government action is needed to help reduce costs and spur building activity.
“You cannot live in an approval, and this is most certainly true for multi-unit approvals. These projects need to be sold on in order to get to commencement and be delivered to market,” said Tapang.
“Unfortunately, punitive taxes on foreign capital and its consequential withdrawal from the market have kept this volume down.
“In order to see a sufficient rise in home building and rebalance housing supply and demand, governments of all need to help lower the cost of a new home and stop taxing those who build them.”
This backwards momentum in dwelling approvals could prevent the government reaching its target of building 1.2 million homes by 2029.
Last month’s dwelling approval data from the ABS highlighted a risk of missing the target by 20 per cent.
HIA senior economist, Tom Devitt, said at the time that the government is “well of what is required to commence 1.2 million homes over five years”.
“Multi-unit activity needs to be twice as large as recent levels for the Australian government to achieve its target of 1.2 million new homes over five years,” said Devitt.
“As it stands, the government is set to fall almost 20 per cent short of its own target and a few interest rate cuts from the RBA won’t be sufficient to increase the supply of homes to meet the 1.2 million target.”
This article was originally featured in SPI's sister brand Broker Daily.