Australian Property Prices Continue to Surge Despite Rate Hike Anticipation

As Australian home values approach record highs, there are strong indications of a potential interest rate hike on the horizon, with the Reserve Bank of Australia (RBA) keenly watching the market. In light of new data, experts suggest that national home values might hit a new record within weeks, causing a potential domino effect on the nation’s financial policies.

According to a report by Rachel Clun, CoreLogic’s latest home value index reveals that national values rose by 0.9% in October. Tim Lawless, CoreLogic’s research director, mentioned, “It’s almost a given that the national index will get back to a new record high next month.” This surge in property values since January has been pronounced in certain capitals with Sydney witnessing a rise of 10.9%, Perth at 10.8%, and Brisbane at 10.2%.

On the other hand, Peter Hannam cites PropTrack data indicating that national home prices inched up by 0.36% in October, making it a nearly 5% rise for 2023. “We’ve seen national prices have now risen for 10 consecutive months,” stated PropTrack’s senior economist, Eleanor Creagh.

Interestingly, while interest rates have been climbing, property prices have not seen a proportionate dip. As Hannam mentions, the rise in property values during 2023 defied many analysts’ expectations, given that the RBA has been lifting interest rates swiftly, including four rate hikes in 20232. Despite the rapid rate hikes, limited sales volumes and rising populations have continued to drive property prices upwards in several capital cities.

However, the trend could change with another anticipated interest rate rise. Eliza Owen, the head of residential research at CoreLogic, shared, “I think the re-acceleration in housing [price] growth might be short-lived, given the increasing prospects for a rate rise next week.” She also points out the increase in new listings that might affect the pace of price gains in specific markets.

The rising property values, especially in areas like Perth, Brisbane, and Adelaide, suggest a robust and competitive market. With the Perth market remaining highly competitive, the total number of properties listed for sale in Perth continues to reach record low levels, as highlighted by Creagh.

Nevertheless, there are caveats to consider. While house prices increase, consumer sentiment remains low. As Lawless noted, “When sentiment is really low like it is at the moment – around GFC and early pandemic lows, and it could move even lower from here – there’s a pretty good chance that we’ll see the volume of sales drop a little bit further as well.”

As Australia’s property market continues to see these contrasting trends, only time will tell how the anticipated rate hike will further shape the property landscape.

References:

“Interest rate rise looms as Australian home values approach record high” by Rachel Clun  https://www.smh.com.au/politics/federal/interest-rate-rise-looms-as-australian-home-values-approach-record-high-20231031-p5eg9u.html 

“Australian property prices soar to record levels despite higher interest rates” by Peter Hannam  https://www.theguardian.com/australia-news/2023/oct/31/record-property-prices-in-multiple-australian-cities-with-sydney-up-75-in-past-year