Capital cities lead monthly decline in national home prices
While home prices decreased over the first month of 2025, industry experts have advised that upcoming interest rate changes may see a reversal of this trend.
Recent findings from PropTrack’s latest Home Price Index have revealed that national home prices fell 0.08 per cent in January 2025 to a median value of $796,000.
Despite this monthly fall, national home prices still remain 3.82 per cent higher year-on-year.
REA Group’s senior economist, Eleanor Creagh, explained that the pace of home price growth slowed throughout 2024, with these “small falls over the past two months” carrying over into the new year.
“This softening in growth has occurred alongside a surge in stock for sale, giving buyers more choice and reducing the urgency to transact,” Creagh said.
“Affordability challenges, weaker economic conditions and the sustained higher interest rate environment have also been contributors to slowing – and reversing – growth,” she added.
The three capital cities which led price falls in January
The report found that capital city markets led the decline in prices over the month, falling 0.16 per cent in January to a median value of $865,000, with regional areas instead recording a 0.12 per cent rise to a median value to $658,000.
Across the capital cities, Hobart led in price falls in January with a 0.46 per cent decline to a median value of $670,000, marking the city’s second consecutive month of falls.
While Creagh noted that prices still registered 0.87 per cent higher than the same time last year, Hobart nonetheless remains the weakest capital city market when comparing change from peak, with prices down a significant 7.78 per cent.
Melbourne’s market followed with the next greatest monthly decline of 0.30 per cent to a median value of $779,000, registering 3.39 per cent lower below January 2024 levels and 6.12 per cent below the city’s peak in March 2022.
Notably, Melbourne’s market ranked as the fifth-most expensive capital in January after being surpassed by Adelaide late in 2024.
Weighing in on the city’s downward trend, Creagh said that price growth has been weaker over the past four years partly due to greater buyer choice and higher property taxes in Melbourne, and noted that construction activity in broader Victoria has “aligned more closely with population growth over the past decade”.
Prices fell 0.21 per cent in the Sydney market to a median value of $1,101,000, marking the third-highest price fall of the month, and bringing prices 0.98 per cent below the city’s peak.
Even with this decline, Sydney prices remained a modest 2.25 per cent above their levels from a year ago.
Within the city, the annual growth of 2.53 per cent in house prices also outperformed the 1.24 per cent lift in unit prices over the same period.
Creagh noted that affordability has been a recent driver across Sydney, with more affordable regions such as Outer West, South West and Parramatta, outperforming over the past year.
Top performing markets remain strong for price growth
While the report’s findings showed that annual price growth has remained the strongest in Perth (+15.38 per cent), Adelaide (+12.41 per cent) and Brisbane (+10.44 per cent), the pace of growth was observed to have slowed in recent months.
Perth home prices were flat in January, remaining at the city’s price peak and marking the market’s smallest monthly change since mid-2022 when prices briefly fell.
Although the city’s pace of growth has slowed significantly over the past year, Perth remained as the top performing capital market for annual home price growth (+15.38 per cent), and registered a median value of $775,000.
Creagh highlighted the comparative affordability of Perth’s homes, alongside strong population growth and limited new housing supply, as contributing to the city’s “persistently strong growth of recent years”.
Adelaide’s home prices fell a small 0.07 per cent in January to a median value of $795,000, marking the second consecutive month of falls for the city, and bringing prices 0.27 per cent below the market’s peak.
Despite these minute falls, Adelaide has remained one of the top performing capitals over the past year, with prices 12.41 per cent above January 2024 levels.
The comparative affordability of Adelaide’s homes was singled out by Creagh as a driver of the city’s persistently strong growth of recent years, although she noted the price of growth has slowed and reversed, with Adelaide’s affordability lessening significantly amid the higher interest rate environment persisting.
Brisbane was notably the only capital to record price rises in January, with home prices lifting 0.08 per cent to a median value of $871,000, with annual growth of 13.96 per cent in unit prices outperforming the 9.81 per cent growth in house prices over the same period.
Even with the pace of growth in Brisbane slowing significantly over the past year, the city has remained one of the strongest performing capital markets over the past year, with current home prices marking a new peak level, and registering 10.44 per cent above January 2024 levels.
As a result of this recent growth, Brisbane has risen the ranks to become the second-most expensive capital city, with prices up 84 per cent over the past five years, placing the city ahead of Melbourne and Canberra’s markets.
Looking broadly at the future outlook for price growth nationwide, Creagh highlighted the “interest rate cuts on the horizon” in stating that “the price falls seen over the past two months are likely to be short lived”.
“As interest rates move lower this year boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth,” Creagh said.
“However, the stretched starting point for affordability will likely dampen the uplift in prices compared to prior easing cycles, resulting in the pace of home price growth trailing the strong performance of recent years.”