Property price gains are picking up momentum in major cities as the number of homes listed for sale starts to lift from “extraordinary low levels”, data group CoreLogic says.
Up to the middle of May, home values in Sydney had risen 1.4% on a rolling four-week average from 1.3% at the end of April. For Brisbane, prices increased 1.1%, up from 0.3%. Perth values were up 1%, Adelaide 0.6% and Melbourne’s home prices rose 0.5%.
Tim Lawless, CoreLogic’s research director, said the spurt in population – with 400,000 migrants expected in the year to June alone – countered the effects of the Reserve Bank lifting its cash rate at the start of May for an 11th time in a year.
“It looks like at the moment the imbalance between supply and demand is enough to offset high interest rates,” Lawless said. “Whether or not that can be sustained is yet to be seen. If we see another rate hike, for example, you’d have to think that’s going to quell some of this exuberance in the marketplace.”
The revival of the housing market complicates the RBA’s task to rein in inflation without tanking the economy. Rising rents add directly to consumer price rises, while a lift in property prices boosts spending because many people feel better off.
“While the significant decline in housing prices over the preceding year had constrained consumption spending, housing prices had recently stabilised and some increases had been recorded,” the RBA said, according to the minutes from May’s meeting. “In recognition of this, the forecast for consumption growth by mid-2025 had been revised a little higher.”
Similarly, the last Westpac-Melbourne Institute monthly survey of consumer sentiment showed confidence falling sharply after the rate rise and a “mildly disappointing budget”. The key exception, though, was the housing-related gauge.
“The ‘time to buy a dwelling’ index lifted 7.3% in May, extending the 8.2% gain in April,” Westpac said. At 76.3, the index is back in the narrow 75-80 range typical before interest rates began to rise, although it remains about 40% below its most recent peak in November 2020.
Major city auctions will near 2,000 this week, or about 18% more than this time last year. Still, the measure remains about a quarter below the five-year average, and it will be a “real test” of the recovery to see auction activity rebound, Lawless said.
“If confidence in the housing sector is improving, we might start to see vendors becoming more active,” he said. “But we’re not really seeing any evidence of that happening at the moment.”
Rents, meanwhile, are continue to advance at an annual pace of about 10% nationally, although renters “are approaching the ceiling” of what they are able to pay. With real incomes still shrinking and credit hard to come by for renters to pay more rent, expect households to increase in size. Homelessness and “couch-surfing” will also likely rise, Lawless said.
“People who can afford it will be looking to escape this rental situation,” he said, which will add to buying demand for property.
Supply, meanwhile, “is going to be even worse” for at least another year or two before new housing starts picking up.
