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Australian property prices surged by 8.1 per cent in 2023 but forecasts predict the stubbornly high cash rate will keep housing costs in check.
Corelogic's latest housing report revealed housing prices continued to rise in 2023 but five of the eight capitals are still recording home values below record highs.
In 2021, property prices soared by 24.5 per cent.
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Home values miss record highs in 2023
December saw the smallest increase in property prices, just 0.4 per cent, which CoreLogic's research director Tim Lawless attributed to rising cost of living pressures including interest rate hikes and inflation.
"After monthly growth in home values peaked in May at 1.3 per cent, a rate hike in June and another in November, along with persistent cost of living pressures, worsening affordability challenges, rising advertised stock levels and low consumer sentiment, have progressively taken some heat out of the market through the second half of the year," he said.
The report also found there is a disparity in home value trends across Australia with some cities seeing stark rises while others dropped.
Home values have been rising at more than 1 per cent each month on average across Perth, Adelaide and Brisbane since May.
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Meanwhile, in Melbourne and Sydney, the pace of growth has slowed sharply since the June rate hike.
Smaller capital cities like Hobart and Darwin recorded small declines in prices.
"Such diversity across the capital cities can be broadly attributed to factors relating to demand and supply," Lawless said.
"In Perth, Adelaide and Brisbane, housing affordability challenges haven't been as pressing relative to the larger cities, and advertised supply levels have remained persistently and substantially below average.
"The cities where home value growth has been lower or negative through the year are showing higher than average levels of advertised supply alongside annual home sales which ended the year below the five year average."
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Rental prices still on the rise
In a year of rising interest rates, surging inflation and record-high prices, some cities finished 2023 softly.
Sydney property prices remained -2.1 per cent below the January 2022 peak, Melbourne was down by -4.1 per cent from the March 2022 peak, ACT by -6.3 per cent, Hobart by -11.2 per cent and Darwin was -2.8 per cent below the August 2022 peak.
But what about renters? The report found there was an increase of 8.3 per cent nationally in rental prices in 2023 which is below previous years record highs.
"Despite the slowdown in annual rent growth, the last year's result was still more than four times the pre-COVID decade average of 2.0 per cent per annum," the report found.
"In dollar terms, the annual rise in dwelling rents equates to approximately $46 more per week based on the median rental value."
2024 forecast to see housing prices slow
For 2024, CoreLogic forecasts high interest rates and slowing economic conditions to impact the property market with lower housing prices.
CoreLogic forecast that another cash rate hike is unlikely but interest rates will remain the main contributor to fluctuating house prices.
"A reduction in the cash rate target through 2024 could help to re-stoke demand later in the year," the report said.
"Stoking a housing value rebound on the back of lower interest rates is arguably an outcome that policy makers would like to avoid," Lawless said.
"Even if interest rates do come down later this year, credit availability is likely to remain relatively tight."
