At Hotspotting we believe real estate markets are local in nature and are subject to the strength or weakness of the local economy.

While economists cling to their kindergarten theory that markets are essentially driven by interest rates, the stark differences in local markets across Australia suggest that there is something more powerful in play.

If it were true that high interest rates mean prices will fall, then everywhere in Australian would have falling property prices in 2024, which is what major bank economists and others like them predicted at the start of the year.

The reality that Perth, Brisbane, Adelaide and many key regional centres have had booming property prices indicates that (a) the economists are wrong in their simplistic theory; and (b) there are larger forces of influence, which are local in nature.

And the record shows that the local economy is the key factor, over-riding any influence from interest rates, which are the same everywhere in Australia.

For that reason, I always take note the quarterly editions of The State of the States report published by CommSec, which is part of Commonwealth Bank.

For many years I’ve detected a correlation between the findings of that report and outcomes with property prices in our capital cities and our regional markets.

The report uses eight different metrics, including construction work, population growth, retail spending, housing finance and employment data, to rank the eight state and territory economies.

The latest quarterly edition of State of the States ranks the states and territories like this: Western Australia 1, South Australia 2, Queensland 3.

Not coincidentally, the leading cities with booming property prices are, in order, Perth 1, Adelaide 2 and Brisbane 3.

In addition to that, the leading regional markets are Western Australia, South Australia and Queensland.

The report finds that the greatest strength for WA is population growth while the greatest weakness is dwelling starts – and those two factors working together would tend to put upward pressure on property prices (and rents).

South Australia’s greatest strength is economic growth while in Queensland it’s housing finance.

The jurisdictions with the weakest economies – the Northern Territory, the ACT and New South Wales – are also the places where property prices have been weak recently.

So if you want a simple method of detecting where dwelling prices are most likely to be strong, keep track of the quarterly editions of the State of the States report.