Property markets diverge as rate cuts spark regional winners and losers

Interest rate cuts have sparked renewed price growth across Australia, with previously underperforming markets now taking centre stage while some boom regions begin to cool.

The data reveals a recovery is well underway in capitals such as Darwin, Hobart and Canberra, where price growth had lagged other major cities.

Darwin recorded the strongest growth among capitals, with prices up 2.8 per cent over the past three months and 6.1 per cent annually.

Newcastle emerged as Australia’s hottest market over the past quarter, with house prices rising 3.6 per cent in three months and 6.9 per cent over the year.

In Melbourne, prices have stabilised and begun recovering after the city languished behind other capitals since the pandemic.

The strongest quarterly house price growth was recorded in inner Melbourne, up 3.5 per cent, and the north west, up 2.2 per cent.

Unit growth was strongest in inner Melbourne at 5.5 per cent, the south east at 3.3 per cent and north west at 2.8 per cent.

REA Group senior economist Eleanor Creagh said Melbourne’s turnaround resulted from its relative affordability and stabilising sentiment.

“Melbourne is now catching up after a sustained period of underperformance relative to other capitals – a common pattern in cyclical housing markets,” Creagh said.

“The recent rate cuts and prospects of further easing have improved borrowing capacity and boosted buyer confidence, providing a catalyst for a gradual rebalancing.”

In Sydney, the inner west, south west, Parramatta and Sutherland regions recorded the fastest quarterly growth for houses, while unit prices grew fastest on the northern beaches.

Ben Pike, director of Pulse Property Agents in Sutherland, said buyers feared prices would jump quickly due to falling interest rates and had become more competitive.

“People still have 2021 in their memory when the market jumped up about 25 per cent,” Pike said.

“Week on week we’ve seen more engagement with listings online, more enquiries, and open home numbers have tripled.”

The Illawarra region recorded almost 2 per cent growth in the past three months, with values growing faster than Sydney overall in the past year.

Newcastle real estate agent Lyndall Allan of Salt Property said demand increased when interest rates were cut.

“We always have a steady interest from people wanting to move to Newcastle but of late we have a much bigger influx of investors,” Allan said.

“Rentals are very strong here so it makes good investment sense.”

However, several regions recorded property price declines over the past quarter or significantly slower growth than previous months.

Many of these regions had been among the strongest-performing property markets in recent years, with prices doubling in some cases over five years.

In Perth’s north east, house prices declined 0.8 per cent in the past three months, while in Mandurah, the 0.7 per cent quarterly increase was much slower than the same time last year.

House price growth in Bunbury has stagnated, with values flat over the quarter.

Creagh said the slowdown in price growth in many previously booming regions indicated conditions were normalising.

“Markets like Mandurah and Bunbury have recorded persistently strong growth in recent years, driven by affordability and lifestyle appeal, internal migration from capital cities and investor activity chasing yield and price growth,” she said.

“The recent slowdown in these regions is consistent with the late-cycle dynamics – after years of above-trend growth, price levels have pushed closer to affordability ceilings and demand has eased.”

In Queensland, house prices fell 1.7 per cent over the past three months in the Mackay-Isaac-Whitsunday region, despite significant increases last year.

Townsville, which remains the nation’s strongest region for annual house price growth, recorded slower quarterly growth in recent months.

Townsville real estate agent Jools Munro of Explore Property Munro & Co said elevated pricing meant investor interest was waning.

“We are definitely seeing a decrease in the number of interstate investors,” Munro said.

“We’ve still got a lack of supply to keep the pressure on the value of homes, but certainly we are starting to see our days on market for houses blow out.”