The pace of growth in Australian home values accelerated in October, rising by 1.1%, the fastest monthly gain since June 2023.
Momentum has been building in the rate of housing value growth since the first rate cut in February, pushing the annual pace of growth to 6.1% nationally.
"Before the February rate cut, housing conditions were losing momentum, even recording flat to falling values through late 2024 and January 2025," said Tim Lawless, Cotality's research director. "The first rate cut in February marked a clear turning point, with home values moving through a positive inflection across most regions and gathering steam since then."
Monthly gains have been broad-based, with every capital city and rest of state region recording a monthly rise in value, ranging from a 1.9% surge in Perth to a 0.3% rise across Hobart.
Century 21 Chairman and Owner, Charles Tarbey wasn't surprised to see such strong performance from the Perth market, "The mix of low unemployment, strong household spending and population growth make Perth and Western Australia an attractive place to own property.
"Interestingly, Commsec's recent State of States report, which Western Australia topped, had the state leading the nation in new housing builds with project starts up 24.8 per cent above the decade average. Despite this, Perth has achieved over 9 per cent housing price growth over the recent 12 months.
"This suggests that a property market and wider economy can still succeed, or even be fuelled by, new housing construction and new construction doesn't have to equate to a drop or fall in prices as many people fear," said Charles Tarbey.
There are many factors contributing to stronger housing conditions, but ultimately the uptick in growth is reflective of supply falling well short of demand. At the national level, Cotality's rolling quarterly estimate of home sales is tracking 3.1% above the previous five-year average, while advertised supply levels over the four weeks to October 26thwere 18% below average.
Such tight advertised supply levels against above-average levels of demonstrated demand have skewed selling conditions towards vendors through spring. Although auction clearance rates have eased a little, they have held above the decade average — in the high 60% to low 70% range since the start of spring.
The step up in growth rates also coincides with the expanded 5% deposit guarantee scheme going live on October 1st,which has likely added to housing demand, especially around the lower to middle price points of the market.
"As we have forecast in the past, the new deposit scheme appears to have added to housing demand and this demand may not subside very quickly. I suspect that demand will come in waves as new groups of first homebuyers are approved for finance," said Charles Tarbey.
"The problem as I see it is that added first homebuyer demand, when applied to certain markets, may push the prices up in these markets and to a point where they are no longer applicable to first homebuyers in the future.
"New and affordable housing stock is going to need to be consistently coming online or the government may have to raise the price caps for first home buyers which in turn could create new loan serviceability risks," said Charles Tarbey.
"I can also see certain markets not doing as well as others despite now having higher price caps than in the past. Sydney, despite having the nation's largest price cap under the new deposit scheme ($1.5m), will have many first homebuyers weary of servicing higher mortgage repayments that will be associated with costly property purchases in this market. That is, just because first home buyers can now purchase more expensive property under the new scheme, doesn't mean they will, or should," said Charles Tarbey.
Indeed, it is the broad middle and lower quartile of the market where gains are strongest. Across the combined capitals, dwelling values were up 1.4% across the middle market and rose 1.2% across the lower quartile, while upper quartile values were 0.7% higher through the month.
"The upper quartile of the market is showing the lowest rate of growth across almost every capital city," said Cotality's research director, Tim Lawless. "Stronger housing demand at the lower price points is likely a culmination of serviceability constraint eroding purchasing power, persistently higher than average levels of investor activity, and what is likely a pickup in first home buyers taking advantage of the expanded deposit guarantee."
Mr Tarbey said that savvy property investors had likely been targeting this end of the market and may continue to do so in the future, "Investing into areas that are on the affordable side of the market may represent a strong capital gain opportunity in the short to medium term. As new waves of first homebuyers enter the market and target these market segments, prices may rise substantially in these locations.
"That being said, many new first homebuyers may not be purchasing their first property as a 'forever home'. In time, we may see many in this group buy more expensive properties when they have built up the equity and financial footing to do so," said Charles Tarbey.
Regional markets also posted a solid increase in the monthly rate of growth, with the 1.0% increase the highest monthly gain across the combined regional markets since March 2022. Regional WA recorded the strongest rise, with a 1.8% increase in values, followed by Regional Qld up 1.1% and Regional NSW with a 1.0% lift.