The national house price has dropped for the first time in two years – although experts expect the downturn to be shallow and short-lived.

“We’re at the point now where something’s got to give,” CoreLogic Australia head of research Eliza Owen said.

“There’s too much of a gap between where market values are and where people can afford.”

“That gap was sustained by higher-income buyers. It was sustained by people using profits from resale to buy their next home,” she said.

“But eventually, even that segment of the market gets exhausted of demand once they bought their properties, and I think that’s partly what we’re seeing now as well.”

Her comments come after national home prices dropped by -0.1 per cent in December, following 21 months of growth. Home values were pushed up 14.3 per cent during that time, peaking in October 2024 and steadying in November.

There have also been signs of homes struggling to sell, with the number of property listings at the end of 2024 being 5 per cent higher than at the same time last year.

Selling times rose through the December quarter, up to 33 days from 28 days a year ago.

What’s next for home prices?

Prices will be on the rise again in 2025, according to ANZ’s latest forecast.

“We expect capital city housing prices to grow 2.7 per cent in 2025,” ANZ economist Madeline Dunk said.

However, she said price rises were not expected to come until the year’s second half.

“It will be a year of two halves in many ways,” she said.

“We think that weakness in the market is likely to continue in the near term until rate cuts come into effect.”

Those expecting to see a big drop in rates may be disappointed. Dunk said it was expected there would be “a very shallow easing cycle from the RBA”.

“We’re expecting the first cut in May, but we’re only expecting two cuts, taking the cash rate to 3.85 per cent.”

Those cuts are forecast to support prices in the second half of the year.

“If you look at our monthly profile, we have got prices rising in the second half of the year, but that’s also being counterbalanced by the fact that we are likely to see more falls in the first half of the year.”

Capital city housing prices. Source: Corelogic (historical), ANZ Research (forecasts)

What’s happening around the country

One thing we know is that the state of the property market around the country has played out very differently in the downturn.

And recovery in 2025 is likely to play out at a different pace in each state.

Melbourne, and now Sydney, prices have been a drag on the rest of the country, Owen said.

“The national value decline is mainly due to Sydney and Melbourne, which account for roughly 40 per cent of Australian housing stock, and 50 per cent of Australian housing value,” she said.

“While the downturn is largely driven by Sydney and Melbourne so far, the general market trend is still experiencing a slowdown in most regions.”

Stronger cities

The outlook across the country for 2025 is expected to be diverse Dunk said.

“If I think about Brisbane, Adelaide and Perth, we’re still expecting reasonably robust growth there,” she said.

That is reflected in the bank’s forecast of price growth in Perth and Brisbane of above 5 per cent, while in Sydney and Melbourne it sits below 1 per cent.

This article first appeared on View.com.au. Read the original here