Australian house prices rose for a second consecutive month in April, suggesting a stabilization of the property market that’s coincided with the central bank pausing interest-rate increases.
(Bloomberg) — Australian house prices rose for a second consecutive month in April, suggesting a stabilization of the property market that’s coincided with the central bank pausing interest-rate increases.
Prices in bellwether Sydney jumped 1.3%, followed by Perth and Brisbane, resulting in a 0.7% increase for the nation’s major cities, data from property consultancy CoreLogic Inc. showed Monday.
Australia’s central bank is expected to keep its key rate unchanged at 3.6% for a second straight meeting on Tuesday, with money market pricing suggesting its tightening cycle is all but done. The Reserve Bank raised rates by 3.5 percentage points between May 2022 and March, resulting in house prices falling back from elevated levels reached during the pandemic.
The RBA’s pause, together with renewed immigration that’s increased demand, has boosted sentiment in the property market. Chronic undersupply, particularly in Sydney, is also fueling prices.
“A significant lift in net overseas migration has run headlong into a lack of housing supply,” said Tim Lawless, research director at CoreLogic. “As interest rates stabilize there is a good chance consumer sentiment will improve, bolstering housing market activity from both a purchasing and a selling perspective.”
Some economists, including those at ANZ Bank, have upgraded their home price forecasts in recent weeks, saying the market is past its trough.
“We previously thought the sharp rise in interest rates would continue to weigh on housing prices through most of 2023, with prices declining 10% through the year,” Felicity Emmett, ANZ’s senior economist, wrote in a research note before the latest data. “We now think most of the weakness is behind us.”
Australia’s population growth has been accelerating and is currently running at about 2%, compared with an average 1.5% prior to the pandemic.
“Low levels of supply and stronger than expected demand look to have trumped the impact of higher mortgage rates over recent months,” Emmett said, pointing to strong household income growth and large savings buffers as likely reasons for the surprisingly early recovery in prices.
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