Australian home prices strong as RBA seen standing pat

AUSTRALIAN home prices stayed strong in September, driven by soaring demand and outweighing the impact of the central bank’s aggressive policy tightening campaign.

Sydney prices, the national bellwether, advanced 1 per cent, down slightly from the previous month, property consultancy CoreLogic said on Monday (Oct 2). Adelaide led September’s gains – climbing 1.7 per cent.

In the more expensive cities – Sydney and Melbourne – the broad middle of the market is recording the highest growth rate after previously being led by the upper quartile, CoreLogic said. Regional markets continue to lag capitals.

“Possibly we are starting to see renewed affordability challenges deflecting more demand towards the middle of the market where barriers to entry are lower,” said Tim Lawless, research director at CoreLogic.

The Reserve Bank of Australia (RBA) has raised borrowing costs by four percentage points since May last year to take the cash rate to its highest level in over 11 years. The unexpected recovery in the property market is a potential worry for policymakers as households feeling wealthier are more likely to spend, adding to inflation pressures.

Despite the RBA’s concerns about housing, the bank is expected to leave its policy rate unchanged for a fourth straight meeting this week as it assesses the impact of its tightening to date. BLOOMBERG