Australian home values rose again last month, bouncing back from a slight slowdown at the end of last year, according to the latest data from CoreLogic.
The Home Value Index, looking at the price of houses and units, was up 0.6 per cent nationally, and showed an increase in all cities except Hobart.
In February, dwelling prices were up 0.5 per cent in Sydney, 0.1 per cent in Melbourne, 0.9 per cent in Brisbane, 0.1 per cent in Darwin, 0.7 per cent in Canberra and 1.1 per cent in Adelaide. Perth reported the highest increase of 1.8 per cent in the past month. Hobart was down by 0.3 per cent.
“At the end of last year it looked like the housing market was entering a bit of a slowdown,” said CoreLogic’s head of research, Eliza Owen.
“But then we get these February results and they’re showing us that, actually, the market has already started re-accelerating again.”
The increase in property values comes despite 13 interest rate rises since May 2022, inflation and rising costs of living as well as a rising unemployment rate.
Undersupply driving house price growth
So what might explain the small increase in property values we’ve seen this month?
Eliza Owen said it’s likely buyer optimism over the possibility of rate cuts later this year and positive news on inflation.
“It’s pretty unusual for economic conditions to be so weak but the housing market showing this really strong trend,” she said.
But there was a bigger economic factor at play too: the old principle of supply and demand. At the moment, Ms Owen said, there aren’t enough dwellings on the market for the number of interested buyers.
Contributing to that were a range of factors, according to Ms Owen.
“We’ve had fewer people per household on average, meaning more households being demanded over the past few years; this continuation in high levels of net overseas migration; and on the supply side, not as much being delivered in the way of new builds because of all the hold-ups and constraint in the construction industry.”
‘Competing forces’ at play could keep a ceiling on growth: Owens
As for what the future might hold, the last few years have shown how hard it is to predict what the Australian housing market will do, but CoreLogic’s Eliza Owen said if the trend continues house prices will continue to go up in the short term.
“I think for the next few months, we’ll probably see prices continue to rise,” she said.
However, she noted, there were many factors that could derail that predicted path: a softening economy, rising unemployment, a delay in expected interest rate cuts (or even a rate rise), and lower household saving rates.
“The competing forces of exuberance in the market, but also high interest rates, high cost of living, rising unemployment, this could actually keep a kind of ceiling on the level of growth that we see this year. And I think it’s going to be a much more normalised growth cycle than the rampant highs we saw back in 2021.”
And there may be some good news for prospective first home buyers on the cards, too.
“If we do see that cash rate reduction at the end of 2024, that would undoubtedly be a boost to the housing market, especially for many prospective renters who might be keen to access more finance and purchase,” Ms Owens said.
Source: House prices continue to rise despite higher interest rates, inflation and cost of living, Nadia Daly for ABC News.