Australian home prices climb as Perth and Adelaide lead gains

THE ongoing imbalance between supply and demand drove house prices higher across Australia’s capital cities in August, though the pace of gains has moderated as affordability constraints emerge. 

Prices in Perth rose 2 per cent, leading gains, while Adelaide’s climbed 1.4 per cent and Brisbane’s 1.1 per cent, property consultancy CoreLogic said. Sydney’s home prices increased 0.3 per cent, while Melbourne’s declined by 0.2 per cent, leaving the combined capitals index 0.5 per cent higher for the month. 

A housing shortage and rapid pace of immigration have propelled home prices across much of Australia, making them increasingly unaffordable for younger buyers. Those elevated housing costs are also hampering the Reserve Bank of Australia’s efforts to tame inflation, keeping the central bank hawkish even as developed-world peers begin to ease policy. 

“Housing values cannot keep rising at the same pace in the mid-sized capitals of Perth, Adelaide and Brisbane when affordability is becoming increasingly stretched, particularly in the context of elevated interest rates, loosening labour market conditions and cost of living pressures,” CoreLogic’s Head of Research, Eliza Owen, wrote in the report.

RBA Governor Michele Bullock has said she doesn’t expect rate cuts this year and has warned further policy tightening may still be needed. The rate-setting board has kept the benchmark at a 12-year high of 4.35 per cent since November as it tries to bring consumer prices back within its 2-3 per cent target. 

Those elevated borrowing costs are putting the brakes on spending, with retail sales stagnating in July, data last week showed.  BLOOMBERG