Rate Hikes Split Australian Housing Market

Rate Hikes Split Australian Housing Market

By: Nfinity Financials0 comments

Australia’s housing market is showing a mix of strength and decline during a historic two-year rate hike period. According to CoreLogic Australia’s latest analysis, there are notable differences between cities, suburbs, and regions, highlighting how economic factors affect property values differently.

Since the rate hikes began in April 2022, the national property market has seen a modest 2.8% increase in home values. This is a sharp drop compared to the 31.7% growth in the previous two years. Experts said this modest gain is due to an initial 7.5% drop in national values during the early phase of the rate hikes, with the national index falling consistently between May 2022 and January 2023. However, since hitting a low in January 2023, the market has shown a strong recovery with values rising 11.1% over 15 consecutive months.

Experts noted that while it may seem like property values are always rising, there was a short but significant downturn right after the first rate increase. Beneath the overall figures, there is a lot of variation in the housing market’s performance.

Diverse Market Conditions

Housing values during the rate hike period vary widely across Australia. Perth’s house values have jumped by 25.7%, while Hobart has seen an 11.2% decline. Sydney’s values have slightly increased by 0.4%, but Melbourne’s have dropped by 4.2%. Experts said this difference shows the complexity of local markets. Some cities are strong because of good economic conditions and high housing demand, while others face challenges like higher supply, affordability issues, and weaker population growth.

Record High Suburbs

Despite the rate hikes, many suburbs have reached record-high values. By the end of April 2024, 43.6% of Australian suburbs had hit new peaks. Capital city suburbs were more resilient, with 49.1% reaching record highs compared to 35.0% in regional areas. Experts said high migration levels, tight rental markets, and a shortage of housing are driving this demand.

Top Performers and Strugglers

Western Australia stands out with the best-performing suburbs. Armadale in Perth’s southeast has seen a 60.0% increase in house values since April 2022. Experts said Perth has 97.3% of its suburbs at record highs, followed closely by Adelaide at 90.0% and Brisbane at 85.1%.

In contrast, regional areas, especially Richmond Tweed in NSW, have faced major declines. Suburbs like South Lismore and Lismore Heights have seen drops of over 25%. Hobart, Melbourne, and the ACT have also been hit hard by the rate hikes, with most of their suburbs recording value declines.

Impact of Rate Hikes

The different effects of rate hikes nationwide reflect underlying economic and demographic trends. Experts said Hobart and Canberra, which were strong during the pandemic, have seen more listings and affordability challenges lately. Melbourne’s struggles are linked to weaker market conditions during the pandemic, along with policy changes and migration patterns.

On the flip side, Adelaide and Perth have shown impressive resilience. These relatively affordable markets have drawn buyers and investors due to strong rental conditions and higher gross rental yields.

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Australia’s housing market is still dealing with the difficulties of a never-before-seen rate hike cycle. Experts said while some places show strong resilience and growth, others are facing declines. This shows how complex and diverse the property market is. As the market adapts, the different performance in cities and suburbs emphasizes the need to understand local dynamics when dealing with real estate.

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