Australia’s housing-market momentum accelerated in August as demand from a growing population vacuumed up new supply and outweighed the impact of the central bank’s aggressive policy tightening campaign.
(Bloomberg) — Australia’s housing-market momentum accelerated in August as demand from a growing population vacuumed up new supply and outweighed the impact of the central bank’s aggressive policy tightening campaign.
Sydney prices, the national bellwether, advanced 1.1% and are up 8.8% from a January trough, property consultancy CoreLogic Inc. said in a report Friday. Brisbane led August’s gains — climbing 1.5% — with every major city recording an expansion outside Hobart on the island state of Tasmania.
“It’s clear the Australian housing recovery is firmly entrenched,” said Tim Lawless, research director at CoreLogic. “Housing demand from strong population growth is set to remain a feature over the coming years, and we are yet to see any material supply response.”
The Reserve Bank has raised borrowing costs by 4 percentage points since May last year to take the cash rate to its highest level in over 11 years. The unexpected recovery in the property market is a potential worry for policymakers as households feeling wealthier are more likely to spend, adding to inflation pressures.
The revival in property comes as total advertised housing supply slipped 15.5% in August compared with a year earlier across the eight major cities. In a sign the problem is unlikely to be resolved in the near term, separate figures this week showed the total number of dwellings approved slumped 8.1% in July, following a 7.9% decline in June.
Despite the RBA’s concerns about housing, the bank is expected to leave policy unchanged for a third straight meeting next week as inflation cools.
What Bloomberg Economics Says…
“Now, prices are running more than 30% ahead of what the average buyer is able to afford, our model shows. Other drivers – surging population growth, a strong job market and reduced supply – could push prices up another 5%, if the current cycle mirrors prior episodes.”
— James McIntyre, economist.
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The Corelogic report also showed the national rental index climbed 0.5%, a 36th straight monthly increase. In annual terms, the index is up 9% in August, almost three times the decade average of 3.2%.
“Every capital city recorded a reduction in total rental listings over the past month, reinforcing ongoing concerns around a lack of rental supply,” Lawless said.
“With dwelling approvals continuing to trend lower, especially across the medium to high density sector, the outlook for additional rental supply remains dim.”
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