Australian home values finished 22.1% higher in 2021, however a two-speed property market has emerged across the state capitals. 

According to CoreLogic, national home values rose 1% higher in December last year, continuing the softening trend in the monthly home value growth rate since March. 

In the Melbourne and Sydney dwelling markets, momentum has slowed quite sharply with both cities recording the softest monthly reading since October 2020.

Brisbane and Adelaide, along with regional Queensland, were the only broad regions where there was no evidence of value growth slowing just yet. 

Source: CoreLogic

“These regions show less of an affordability challenge relative to the larger capitals, as well as better support for housing demand with Queensland in particular showing strong interstate migration,” said CoreLogic Research Director Tim Lawless. 

“Additionally, we haven’t seen the same level of supply response seen in other regions, with the trend in advertised supply remaining well below average in these markets. 

“A surge in freshly advertised listings through December has been a key factor in taking some heat out of the Melbourne and Sydney housing markets, along with some demand headwinds caused by significant affordability constraints and negative interstate migration.” 

CoreLogic found that the more expensive housing markets were slowing down after leading the upswing. 

Across the combined capital cities, upper quartile dwelling values were up 2.6% in the December quarter compared with a 3.7% rise across the lower quartile and broad middle of the market. 

“We have seen this trend in previous growth cycles, where more expensive housing markets have shown greater levels of volatility; housing values tend to rise more through the upswing but record a larger decline through the down phase of the cycle,” Lawless said. 

Regional Australia on the move

Across regional Australia, housing values saw renewed momentum with a monthly rise of 2.2% last month, the highest in nine months. 

Regional Queensland was the clear standout across the rest-of-state markets in December, with housing values up 2.4%. 

Over the year, the strongest regional markets were in New South Wales, up 29.8%, and Tasmania, up 29.5%. 

2022 property outlook

CoreLogic expects there to be further easing in the pace of capital gains in 2022 despite an unprecedented year for the Australian housing markets last year.  

The reopening of international borders is likely to benefit rental demand over home buying demand, particularly across the markets that are popular with students and visitors.  

Housing affordability challenges will progressively weigh on housing demand over the year ahead amid increasingly higher housing values and low-income growth.  

Home ownership and housing affordability will become a hot political issue due to the federal election looming this year.  

CoreLogic also predicts that buyers will start to regain some leverage despite sellers having held the upper hand at the negotiation table.  

The average time on market has started to increase, while auction clearance rates have trended down lately. 

Interest rates and lending changes may also influence property markets if there is an early lift in interest rates or tighter credit policies.  

The biggest wildcard for 2022 remains COVID, given the surging case numbers related to the Omicron strain. 

CoreLogic said a return to restrictive policies would result in a new phase of temporary disruption to property transaction activity.  

Although, it may also prolong expansive monetary policy and low interest rates, which helped sustain housing demand through last year.