Australia home prices post fastest monthly gain in two years
The RBA has cut rates three times since February
[SYDNEY] Australian home prices climbed at the fastest pace in more than two years in October, underscoring the risk that a resurgent property market could complicate the Reserve Bank of Australia’s (RBA) efforts to rein in inflation pressures.
The Home Value Index jumped 1.1 per cent in October, the strongest monthly gain since June 2023, property consultancy Cotality said on Monday (Nov 3). Perth led the increases at 1.9 per cent, followed by Brisbane at 1.8 per cent and Darwin at 1.6 per cent. Bellwether Sydney advanced 0.7 per cent, taking the increase for the nation’s major cities to 1.1 per cent.
Both the national and capital cities indices hit fresh records, a day before the RBA is widely expected to keep interest rates unchanged at 3.6 per cent. The result may add to concerns that inflation is set to remain stubbornly high for some time.
The RBA has cut rates three times since February, marking “a clear turning point” for the housing market, according to Tim Lawless, research director at Cotality, formerly CoreLogic. He added that an expanded government incentive for first home buyers has further intensified buyer demand.
October’s gains were driven largely by the middle and lower quartile segments of the market, the data showed.
“The upper quartile of the market is showing the lowest rate of growth across almost every capital city,” Lawless said. “Stronger housing demand at the lower price points is likely a culmination of serviceability constraints eroding purchasing power, persistently higher than average levels of investor activity, and what is likely a pickup in first home buyers taking advantage of the expanded deposit guarantee.”
Australia has some of the costliest housing in the world, an affordability challenge exacerbated by near-record rental prices. In Sydney, the median dwelling value is at a historic high of A$1.3 million (S$1.1 million), roughly 11 times the median household income.
A structural deficit of supply is the key problem. In a sign that supply is falling well short of demand, Cotality’s rolling quarterly estimate of national home sales is tracking 3.1 per cent above the previous five-year average, while advertised supply levels over the four weeks to Oct 26 were 18 per cent below average.
Residential rents are accelerating too, though housing values are rising faster and placing renewed downwards pressure on gross rental yields which, at 3.4 per cent, is at the lowest level since October 2022, Cotality said. BLOOMBERG
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