Australia’s Housing Market Defies Expectations with a Third Month of Price Rises - Property Inc

Australia’s Housing Market Defies Expectations with a Third Month of Price Rises

Australia’s housing market continued to defy expectations in May, posting a third consecutive month of price increases. According to data from property consultancy CoreLogic, the city of Sydney led the way with a 1.8 per cent increase, the city’s highest rise since September 2021.

This unexpected surge in the housing market has caused further inflationary pressures in the Australian economy, and signals that additional interest-rate increases may be needed to control resurgent demand. Money markets are now almost fully pricing in a quarter-percentage-point hike to 4.1 per cent in August. “With such a short supply of available housing stock, buyers are becoming more competitive and there’s an element of fear of missing out when prices rise,” noted Tim Lawless, research director at CoreLogic.

Although the major cities experienced the most significant increases in house prices, all state and territory capitals posted gains in May, with a combined growth of 1.4% for the capital cities. These cities outperformed their regional counterparts which experienced a modest growth of 0.5%.

Despite the recent increases, CoreLogic’s Home Value Index indicates that median dwelling values in Australia are still 6.8% lower than a year ago. Similarly, capital city home values, in general, remain below their previous peaks.

Lawless points out that the lack of housing stock and increased demand are primary drivers for the current upward pressure on housing prices. This is especially apparent in capital cities where auction clearance rates have consistently been above 70% for the past three weeks.

The low levels of advertised listings have also contributed to the escalating prices. The number of homes advertised for sale fell in May, with new listings 13.1% below the previous five-year average across the nation’s major cities.

However, with improving selling conditions, Lawless believes that more homeowners may look to take advantage of the market’s favourable conditions. “It will be interesting to see if more vendors take advantage of the improving housing market conditions, and look to beat the spring rush when competition to sell could be more intense,” he added.

While it remains to be seen how the housing market will perform in the coming months, current trends suggest continued growth, driven by robust demand and scarce supply. The impact of potential interest rate increases on the market will also be closely watched.

References:

The Business Times, “Australia’s house prices rise sharply in May, driven by Sydney,” (May 31, 2023) https://www.businesstimes.com.sg/property/australias-house-prices-rise-sharply-may-driven-sydney 

Emma Duffy, “Home values mark third consecutive month of gains,” (June 1, 2023). https://www.yourinvestmentpropertymag.com.au/news/corelogic-home-value-index-may-2023 

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