Quick Bites | Aussie Housing Turning Up

Quick Bite: Aussie Housing Turning Up

Author: Paul Zwi

Australia’s housing market snapped a four-month run of small price declines in February, with the CoreLogic home value index ticking up +0.3% in the month. Annual price growth has continued to slow, dropping to 3.2%. Estimates also point to an uptick in sales volumes, coming off a quieter-than-usual summer low period.

Source: Goldman Sachs, CoreLogic

The Reserve Bank of Australia’s (RBA) February rate cut has boosted markets, with an uptick in prices and auction clearance rates similar to the RBA’s easing in 2019, though somewhat influenced by seasonality. Investors are now anticipating further rate cuts in the months ahead.

Source: AMP

The CoreLogic home value index, covering the 8 major capital cities, rose 0.3% in February. Annual growth in rents slowed to 4.1%, the slowest since 2021. Poor rental affordability leading to rising average household sizes and easing student arrivals are weighing on demand for rental property.

Australia continues to have a chronic shortage of homes, estimated to be around 200,000 and perhaps as high as 300,000. This partly explains the resilience of home prices despite the rise in mortgage rates since May 2022.

Housing shortfall in Australia

Source: AMP

RBA rate cuts are expected to drive a modest upswing in average prices this year. However, while there is still a big housing shortfall in Australia, the upswing will be starting from a point of still poor affordability, interest rates are likely to fall only modestly, and population growth is slowing.

Source: AMP