Aussie property market defies rate hikes with price surge
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Photo by Rohi Bernard Codillo
In a surprising turn of events, Australia’s property market has continued its upward trajectory despite looming economic uncertainties and recent interest rate hikes. Data released by PropTrack on Monday indicated that national housing prices rose by an average of 0.5 per cent in February, marking a 9.1 per cent increase, or nearly $90,000, from the same period last year.
This growth comes in the face of significant economic headwinds, including the threat of further interest rate increases, which have yet to dampen the enthusiasm of buyers in the housing market. The latest figures reveal that medium-sized capitals such as Brisbane, Adelaide, and Perth have been at the forefront of this price surge, with monthly increases ranging from 0.6 to 0.7 per cent. Consequently, the median prices of dwellings in these cities are now considerably higher than they were a year ago.
Perth has emerged as the frontrunner in terms of annual growth, with dwelling prices increasing by nearly 20 per cent, or approximately $170,000, over the past year. Brisbane and Adelaide have also seen substantial annual gains, with prices rising by 16 per cent and 15 per cent, respectively.
Hobart, a market previously described as struggling, recorded the largest monthly price rise at 1 per cent, with overall prices up nearly 9.1 per cent from a year ago. This suggests a major recovery for the Tasmanian capital.
In contrast, Sydney and Melbourne experienced more modest growth. Melbourne saw a monthly increase of 0.3 per cent and an annual growth of 3.4 per cent, while Sydney’s prices rose by 0.5 per cent in February and 6.1 per cent over the year. Despite the seemingly slower growth in Sydney, the city’s high property values resulted in average gains of close to $103,000.
Several factors have been attributed to the persistent rise in property prices, including low listing volumes, declining construction levels, and above-average population growth. Additionally, the federal government’s First Home Guarantee Scheme, which facilitates transactions for eligible buyers with small deposits, has been identified as a significant driver of price increases.
Julian Finch, director of financial services group Finch Financial, highlighted the impact of the scheme. “(The scheme) has really increased competition,” he said, noting that most participants since the scheme’s expansion in October have been higher-income first-home buyers. The October amendments removed salary caps and raised price caps, now reaching as high as $1.5 million in Sydney and $1.1 million in Brisbane.
Eleanor Creagh, an economist at REA Group, also credited the scheme for boosting demand in more affordable markets, which has led to faster price rises in units compared to houses. “Unit price growth outpaced houses, indicating demand is shifting towards more affordable stock,” she explained. Creagh noted that this shift is logical given the strong house price growth over an extended period, adding, “demand is facing into tight supply.”
The fact that many Australian capital cities now have median house prices above or approaching $1 million is a significant development, according to Creagh. She pointed out that home prices in Perth, Adelaide, and Brisbane are nearing double what they were five years ago. “A $1 million median represents a significant shift in the housing landscape,” she said.
While the national monthly growth rate of 0.5 per cent is described as “fairly strong,” Creagh cautioned that the market may face challenges ahead. “We will see growth slowing, especially with another rate rise,” she predicted. “We can expect growth over the coming period to be slower and more uneven.”
Nonetheless, Creagh believes that any potential slowdown in property values is unlikely to be as rapid as in 2022, the last time Australia embarked on a rate hiking cycle, which saw prices drop nationally. As the property market continues to defy expectations, experts and buyers alike will be keeping a close eye on the Reserve Bank of Australia’s next moves and their implications for housing affordability and demand.