High-end markets showed strong growth in February, pointing to renewed momentum within a “bellwether” segment that has historically proven an early indicator of market recoveries.
CoreLogic data for March showed that the upper quartile of capital cities, or the top 25 per cent of home values, rose 0.2 per cent in February, which followed a 0.3 per cent fall in January.
The lower quartile still outperformed in comparison, rising 0.4 per cent in February after a flat result in January.
CoreLogic economist Kaytlin Ezzy said that while still lagging behind the lower quartile and middle market, the monthly change in capital cities’ most expensive 25 per cent of values had had the sharpest turnaround in growth compared with the previous month.
“The upper 25 per cent of values in Melbourne, Sydney and Hobart— which our research shows have historically been some of the most sensitive to rate changes—recorded the largest improvements,” she said.
“The top quartile is the one to watch as they tend to be a bellwether for broader market recoveries in those cities.
“If this momentum continues, the quarterly change in upper quartile values could turn positive and potentially outperform the lower quartile and middle market for the first time since August of 2023.”
Sydney and Melbourne houses and units generally had the most to gain from a reduction in interest rates and that appeared to have been reflected in February’s data, Ezzy said.
“In Sydney and Melbourne, but also Hobart, many of the markets with a solid response to rate reductions are also seeing values well below their peak under recent interest rate rises, so easier access to credit may trigger a recovery trend in these markets,” she said.
In Greater Sydney, the prestige SA3 Eastern Suburbs—North market, including Point Piper, Double Bay and Rose Bay, grew 2 per cent month on month after falling 0.5 per cent in January, marking a 250 basis-point turnaround.
Hornsby followed, with values rising 1.1 per cent in February, and posting a 200-basis-point turnaround from the previous month.
Ezzy said these markets had traditionally responded strongly to changes in financial conditions.
“It is possible that these kinds of markets have a stronger response to cash rate falls because people generally need more finance to buy into them.
“However, the RBA Board minutes and statement in February were fairly hawkish despite the rate cut, so there is some uncertainty as to whether the recent momentum will continue.
“For example, the Sydney clearance rate did lose a little exuberance in the week ending 2 March, with a final result of 64.5 per cent, down from a recent high of 67.2 per cent a couple of weeks prior.”
Similarly, in Melbourne the biggest turnaround in capital growth occurred in the SA3 region of Stonnington East, where the value change lifted from a 1.9 per cent drop in January to a 0.8 per cent lift in February—a 264 basis point lift in performance.
Other high-end markets such as Manningham East, Bayside and Glen Eira also showed a strong turnaround.
The Hobart—North East region, which sits towards the high-end of the local market, had the highest capital growth turnaround in the city in February with a median value of $709,000.
This month’s Home Value Index showed Hobart tied with Melbourne to lead monthly gains, recording the largest month-on-month change across the capitals (up 0.4 per cent) where home values have previously been among the weakest.
Ezzy said that overall the market had had a strong response to the February rate cut, with the daily trend showing a material improvement in the Home Value Index prior to the cut.
“This suggests sentiment was also at play,” she said.
“If buyers are out in market expecting they can access more finance, this may have contributed to a strong market response.”
Meanwhile, CoreLogic estimates the combined value of residential real estate held steady in February at $11.2 trillion.
National home values fell 0.1 per cent over the rolling quarter, with the capitals down 0.4 per cent and the regions up 1 per cent.
CoreLogic estimates there were 40,085 sales nationwide in February, taking the rolling 12-month count to 532,244. While the annual measure is up 6.2 per cent compared to last year, sales activity has slowed over the three months to February.
