Adelaide Surpasses Melbourne in Property Market Milestone

Adelaide’s property market has reached a significant milestone, with home values surpassing Melbourne’s for the first time on record. According to data from CoreLogic, Adelaide’s home values climbed by 1.4% in August, bringing the median value to $790,789, making it the fourth most expensive housing market in Australia, just behind Sydney, Brisbane, and Canberra.

In another remarkable shift, Perth’s median dwelling value also overtook Melbourne’s for the first time since 2015. Perth’s home values saw a 2% increase in August, reaching $785,250, positioning it as the fifth most expensive capital city market in the country. These developments highlight a broader trend in which the traditionally more affordable markets of Adelaide and Perth are experiencing significant growth, while Melbourne’s property values continue to decline.

Despite these impressive monthly gains, the overall pace of price increases has slowed across Australia in recent months. The seasonally adjusted home value index rose by 1.7% over the three months to August, which is a noticeable decline from the 3.3% increase recorded during the same period last year. The slowdown is attributed to factors such as poor affordability, high interest rates, and the surging cost of living, which are beginning to weigh heavily on the market.

Sydney, while still the most expensive housing market, also saw its price growth ease to 0.8% in the last quarter, down from 1.3% in the previous quarter. Brisbane, which had been experiencing rapid growth, recorded the sharpest slowdown, with its price growth decreasing to 2.9% from 4.1% in the previous quarter.

Perth’s price increases over the last three months slowed to 5.7%, down from 6.2% in the preceding quarter, while Adelaide’s growth eased slightly to 4% from 4.1%. According to Eliza Owen, CoreLogic’s head of research, the slower winter season may have impacted these results, but affordability constraints are the key factor behind the broader slowdown. She noted that the mid-sized capitals like Adelaide, Perth, and Brisbane are becoming increasingly unaffordable, particularly in the context of elevated interest rates and cost-of-living pressures.

Melbourne’s housing market continues to weaken, with values falling by 0.2% in August, marking the sixth consecutive month of declines. Over the past three months, Melbourne’s home values have dropped by 1.2%, making it the cheapest major housing market in Australia. The city’s median value is now $776,044, a decline that reflects both an ongoing downturn and the impact of a high concentration of relatively affordable units in the market.

Experts suggest that while Adelaide and Perth are currently benefiting from strong growth momentum, their respective house and unit prices could continue to outpace Melbourne’s in the short term. However, Melbourne’s market could see a resurgence once interest rates begin to fall, making homes there more affordable compared to other capital cities. AMP chief economist Shane Oliver anticipates that undervalued markets like Melbourne could experience faster price growth than Adelaide, Perth, or Brisbane by mid-next year, as affordability constraints start to limit growth in those cities.

In summary, Adelaide and Perth are currently leading the way in Australia’s property market, overtaking Melbourne in median home values for the first time. However, the overall market is showing signs of slowing, with affordability and economic pressures playing a significant role. As the market dynamics continue to evolve, Melbourne may see a stronger performance in the coming years, potentially realigning with its traditional position in the Australian property hierarchy.