Surge in Australian House Prices: Housing Market on the Mend - Property Inc

Surge in Australian House Prices: Housing Market on the Mend

The Australian housing market appears to be back on its feet, as the surge in house prices continues. Recent findings by PropTrack and CoreLogic illustrate the continued growth and potential recovery of the market.

CoreLogic’s national Home Value Index (HVI) found a rapid acceleration in the growth rate, with a 1.2% increase in May, marking the third consecutive monthly rise since March. Concurrently, PropTrack’s Home Price Index reported sharp rises, with a 2% increase across the capital cities this year, and May observing a rise of 0.33%1. The Index also reported the strongest quarterly home price growth across the combined capital cities since the December quarter of 2021, up by 1.34%.

According to Tim Lawless, CoreLogic’s research director, there’s been a notable drop in available housing inventory, driving competition among buyers1. “Inventory levels are -15.3% lower than they were at the same time last year and -24.4% below the previous five-year average for this time of year.”

On the other hand, Henry Thai, in his article for Reuters, reveals that Australian home prices, which had previously fallen by 9% from May 2022 to February 2023, have begun to increase for the second straight month. This shift has largely been attributed to the Reserve Bank of Australia’s (RBA) expected pause in policy tightening, which has attracted cash-rich home buyers back into the market.

Gareth Aird, head of Australian Economics at CBA, stated that, “We are almost at the top of the RBA’s hiking cycle, which means the headwind on property prices from rates ratcheting higher has largely run its course.” This sentiment is echoed by Adelaide Timbrell, senior economist at ANZ, who noted the recent upturn was unexpected. “We did expect that strong household income growth and large savings buffers would provide a cushion for the fall in house prices. It’s possible that these are providing more support than we originally anticipated,” Timbrell said.

While prices are predicted to stagnate this year, a rise of 4.5% is anticipated in 20242, almost double the rate previously forecasted. Despite this, affordability continues to pose a significant hurdle for first-time home buyers. AMP’s chief economist, Shane Oliver, points out the daunting reality for potential homeowners, stating that “All measures of housing affordability are poor. Despite the fall in prices from their highs, it takes over 10 years for someone on average full-time earnings to save for a deposit, versus five years 30 years ago.”

Though the market is looking up, the lingering issue of affordability continues to cloud the horizon for many prospective buyers.

References:

Thai, H. (2023). “Australian house prices surge again: housing market recovery in full swing”. Retrieved from https://thepropertytribune.com.au/market-insights/australian-house-prices-surge-again-housing-market-recovery-in-full-swing/ 

Mishra, V. (2023). “Aussie housing dip over, prices to rebound into next year on rate view: Reuters poll”. Retrieved from https://www.reuters.com/markets/aussie-housing-dip-over-prices-rebound-into-next-year-rate-view-2023-06-01/ 

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