Australia’s Property Market Surges Despite Rising Interest Rates

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Australia’s property market has exhibited an impressive resilience as it bounces back from the downturn experienced in 2022, leaving analysts and economists in awe. While interest rates have surged and living costs have escalated, how has the market managed to achieve near-record prices?

In a comprehensive overview of the current market, Jessica Taulaga in her article highlighted that the combined capital’s median house price stood at $1,072,480, marking an increase of 5.1% year-on-year. Remarkably, these prices are only a breath away from surpassing record medians set in early 2022.

Despite the surprising recovery, the high interest rates and inflation have raised concerns about housing affordability. Gareth Aird, head of Australian economics at CBA, expressed astonishment, stating that the turnaround “surprised almost every analyst, including the Reserve Bank.” As Taulaga noted, the anticipated fall in housing prices due to the pandemic and the subsequent economic strains didn’t materialize as expected. Instead, the post-lockdown reopening and subsequent population growth, driven by international migrants, have put substantial upward pressure on property prices.

Further supporting this observation, Westpac senior economist Matthew Hassan said, “We’ve seen an extraordinary surge in migration flows in the last year, and where the turnaround in prices has been strongest is in the markets that have seen the strongest lift in population growth – so we’re thinking Sydney, Melbourne in particular.”

In South Australia, the property market narrative is one of robust growth, as reported by Rowan Crosby. The median house price has increased to $640,000, rising by 11.11% over the past 12 months. Even with a drop in sales volume, Real Estate Institute of South Australia Chief Executive Officer, Andrea Heading, emphasized the strong fundamentals of South Australia’s real estate market, noting that interest and attendance at open inspections remain high.

Andrea Heading further added, “It is clear that purchasers are still willing to enter the real estate market and to pay premium prices for properties that are realistically and transparently priced.” Suburbs like Bridgewater, Somerton Park, and Plympton Park have seen significant growth, underscoring the continued appeal of properties that offer affordability, location, and potential.

But what does the future hold? According to the experts, there’s a mixed outlook. While rising property prices spell good news for sellers, buyers in a surging market will face challenges. Aird emphasized the disparity between the demand for housing, driven by population growth, and the limited supply. He pointed out that this imbalance in the housing market has caused a strong surge in rents.

Nicola Powell of Domain believes the rate of growth will soften, stating, “What we saw earlier in 2023 was unusual. It was a real bounce-back because we’d seen such a strong pullback from sellers, but sellers are now coming to the market and I think that will ease the pace of price growth.”

In conclusion, while Australia’s property market exhibits strong resilience, it remains crucial for policymakers to address concerns around housing affordability and supply to ensure a balanced market in the future.

References:

Taulaga, J. (Year). How has Australia’s property market bounced back while interest rates and the cost of living are so high? https://www.domain.com.au/news/how-has-australias-property-market-reached-near-record-prices-in-this-economy-1244379/ 

Crosby, R. (Year). South Australia’s property market goes from strength to strength. https://eliteagent.com/south-australias-property-market-goes-from-strength-to-strength/