Property prices in SYDNEY, the benchmark for the Australian market, increased for a second consecutive month in March. This is encouraging news for national house values, which have been negatively impacted by rising interest rates.
Following a 0.3% increase in February, prices in Sydney increased by 1.4% last month, according to statistics from the real estate consulting firm CoreLogic. They are still down 12.1% for the year that concluded in March.
The combined major cities index rose by 0.8% last month, with gains from Melbourne and Brisbane being somewhat more restrained.
The country’s central bank will be pleased to see indications of housing market stabilization as it attempts to orchestrate a soft landing in its fight against inflation. In a worst-case scenario outlined in an analysis last year, the Reserve Bank of Australia (RBA) worried that by the end of 2024, there could be a 20% peak-to-trough decline.
According to CoreLogic, the data revealed a 9% decline from the national capital city index’s April 2022 peak. As part of its most aggressive tightening cycle since 1989, the RBA raised financing costs by 3.5 percentage points between May and March in an effort to contain consumer prices, which contributed to the decline.
After ten straight increases, the RBA is anticipated to stop tightening on Tuesday, April 4th, according to money market pricing. While ANZ Bank and Goldman Sachs Group predict another quarter-point increase, Commonwealth Bank of Australia and Westpac anticipate it to remain at 3.6%.
According to Tim Lawless, research head at CoreLogic, low levels of supply, constrained rental markets, and higher demand from international migration were supporting home prices.
Although interest rates are high and it is anticipated that the economy will slow throughout the year, Lawless said that other variables are clearly pushing up home prices right now.
Even so, borrowing costs are anticipated to stay high until at least late 2024 as a result of persistently sticky inflation, which could stymie any development.
Before we see rate reductions, “we might see a pretty sustained period of higher rates,” said Peng Yew Wong, a senior lecturer at Melbourne’s RMIT University. Therefore, debtors will have to make larger payments.
The market will be affected by this aspect even though population growth and a shortage of housing are positives, Wong continued. It’s difficult to say.
According to a separate report from Australia’s National Housing Finance and Investment Corp (NHFIC), affordability and supply issues are expected to persist for some time.
The NHFIC issued a statement in which it claimed that “the rapid return of population growth is coinciding with the fastest increases in interest rates for several decades, undermining residential construction feasibilities and weakening the pipeline of new housing.”
According to the report, housing development in Australia had also been hampered by a lack of labor and materials as well as bad weather. After 2025–2026, the NHFIC predicts a recovery in housing supply as macroeconomic circumstances change. BLOOMBERG