Property prices in Sydney and Melbourne have fallen as the number of overseas visitors falls and a slowdown in immigration is expected to reduce prices further.
Property group CoreLogic says a drop in permanent and long-term overseas arrivals from record levels will lead to a slowdown, especially in markets that have become too unaffordable.
“Reduced migration is likely to translate into further easing of rental demand and, in the medium term, reduced demand for home purchases,” CoreLogic said.
Hobart, which does not receive a large influx of foreign or interstate migration.also retreated in 2024, while Perth, Brisbane and Adelaide reached new heights last year with double-digit annual growth.
Sydney’s median house price has declined for three consecutive months since peaking in September, falling 1.6 per cent over the December quarter to $1.471 million.
Melbourne’s median house price fared even worse, falling 1.8 per cent over the final three months of 2024 to $917,616, making it the fourth most expensive capital market in Australia after Sydney , Brisbane and Canberra, despite having the second highest population in Australia.
The Victorian capital had its worst annual fall of 2.9 per cent in 2024, having peaked in March 2022, before the Reserve Bank rate increased, only to be hit last year with a state government land tax of $975 for investors.
Last year, Sydney prices rose just 2.5 per cent, having enjoyed double-digit annual growth in March.
Property prices in Sydney and Melbourne have fallen as the number of overseas visitors falls and a slowdown in immigration is expected to reduce prices further (pictured, a Sydney house listed for sale)
The drop or slowdown in house prices in Australia’s two largest cities came as immigration levels moderated from record highs.
During the last financial year, 445,600 migrants moved to Australia, a big drop from an all-time high of 548,800 in the year to September 2023.
Sydney and Melbourne are home to the most new foreign migrants with 61.8 per cent of them moving to New South Wales or Victoria.
In October, Australia’s net level of overseas migration was around 448,090 arrivals.
But the Treasury expects that inflow to fall to 340,000 by June 2025, and last month published new forecasts in its Mid-Year Economic and Fiscal Outlook.
The Treasury Population Statement forecasts Australia’s annual population growth will slow from 2.1 per cent in 2023-24 to 1.2 per cent in 2034-35 “as net overseas migration moderates”.
“This will reflect a decline and subsequent stabilization in arrivals, and a rebound in departures,” he said.
States that had a higher influx of interstate immigrants still did well at the end of 2024.
The fall or slowdown in house prices in Australia’s two largest cities came as immigration levels moderated from record highs (file image)
Median house prices in Perth last year rose 18.7 per cent to $847,518, and 1.7 per cent during the December quarter, and Western Australia had the strongest pace of population growth in the country, a 2.8 percent.
Median house prices in Brisbane soared 10.2 per cent to $977,575 and 1.1 per cent during the final three months of 2024.
Adelaide’s equivalent house price rose 12.5 per cent over the year to $866,327, and 2 per cent over the quarter, despite South Australia having weaker population growth.
Parts of Sydney’s outer south-west are still growing strongly and Fairfield Heights saw the median house price last year soar 12.6 per cent to $1.112 million.
But in coastal Cronulla, average house prices fell 8.6 per cent to $2.708 million last year.
Other capital cities with weaker population growth fared poorly last year: Hobart’s median house price fell 0.5 per cent last year to $693,924.
The Tasmanian capital peaked in March 2022, when the RBA cash rate was still at a record low of 0.1 per cent.
Canberra, an expensive market with below-average population growth, saw its median house price fall 0.3 per cent during the December quarter to $965,910, for a weak annual growth rate of 0.4 per cent.
The national capital peaked in May 2022, the month the Reserve Bank raised interest rates for the first time since 2010.
CoreLogic research director Tim Lawless said house prices were falling in cities that had become too unaffordable.
“This result represents that the real estate market is catching up with the reality of market dynamics,” he said.
“Home value growth has been steadily weakening over the second half of the year as affordability constraints weighed on buyer demand and announced supply levels trended higher.”
Australian unit and house prices grew by 4.9 per cent last year, but fell 0.1 per cent in December, marking the first national monthly decline since January 2023.
Lawless said rate cuts alone would be insufficient to boost activity in weaker housing markets unless the Australian Prudential Regulation Authority, which oversees banks, relaxed lending rules.
Starting in late 2021, lenders must take into account a potential borrower’s ability to cope with a three percentage point increase in variable mortgage rates.