Australia’s home prices post strongest monthly gain in two years
The Reserve Bank of Australia has cut its key rate three times this year, with expectations of two more reductions by May
[SYDNEY] Australian home prices posted their strongest monthly gain in nearly two years, with an expanded government incentive for first home buyers expected to further intensify buyer demand at a time of already tight supply and declining borrowing costs.
The Home Value Index jumped 0.8 per cent in September, property consultancy Cotality said on Wednesday (Oct 1), the strongest monthly gain since October 2023. Darwin was the top monthly gainer with a 1.7 per cent increase, followed by Perth at 1.6 per cent and Brisbane at 1.2 per cent. Bellwether Sydney climbed 0.8 per cent, taking the median result for the nation’s major cities up 0.9 per cent.
The strongest pace of growth has rippled from the lower quartile of the market to the broad middle, Cotality said, likely a reflection of increased borrowing capacity that is supporting demand at slightly higher price points.
The Reserve Bank of Australia has cut its key rate three times this year, with expectations of two more reductions by May.
“The 75 basis point cut to the cash rate has played a key role in supporting housing activity,” said Tim Lawless, research director for Cotality, formerly CoreLogic. “Lower interest rates have supported a lift in consumer sentiment, which is important for high-commitment decision-making.”
Australia has some of the costliest housing in the world, an affordability challenge exacerbated by near-record rental prices. The government has an ambitious target of 1.2 million new homes by 2029. It has also widened a programme for first-time buyers to purchase a property with a deposit of just 5 per cent.
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Cotality said that the Home Deposit Guarantee scheme which goes live this month will push demand even further.
At the end of September, almost half of Australian suburbs had a median house price within the new government caps for its deposit guarantee scheme. Apartments were even more affordable, with 93.2 per cent of suburbs falling under the thresholds.
“Amid already scarce supply, prospective first home buyers looking to utilise the deposit guarantee may be feeling anxious as competition among buyers picks up,” Lawless said. “We could see the value of houses in well-located areas, recently unlocked by the expanded caps, surpass those new price caps quite rapidly.”
The disconnect between supply and demand has seen selling conditions strengthen, Cotality said. Auction clearance rates have been holding around the 70 per cent mark since mid-August, up from an average of roughly 63 per cent till the June quarter and 62 per cent in the three months to March.
Home prices have risen 2.3 per cent across the capital cities in the three months to September, taking the median value to A$941,457 (S$803,175). In Sydney, the median dwelling value is US$1.24 million by comparison.
Separate figures on Tuesday showed the total number of residential building approvals fell again in August from the prior month. The Property Council of Australia estimates more than 20,000 homes need to be approved a month to reach the government’s housing target, compared with an average of 15,900 since the start of the year.
The supply shortfall pushed the national rental vacancy rate to a new historic low of 1.4 per cent in September, Cotality said.
“The bad news for renters is that rental listings are continuing to trend lower,” Lawless said. “The recent re-acceleration in rents could have implications for inflation down the track.” BLOOMBERG
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