The nation’s love affair with real estate shows no signs of waning. Australian home values rose yet again in February, defying the countervailing economic pressures of higher interest rates, inflation and the rising cost of living.
All capital cities saw growth
CoreLogic's latest Home Value Index tells us there was a 0.6% increase across the nation, with all capital cities except Hobart experiencing growth in property values.
This resurgence in home values marks a significant rebound from the slowdown observed towards the end of the previous year.
CoreLogic's head of research, Eliza Owen, highlighted the unusual nature of the property market's strength amidst weak economic conditions.
"It's pretty unusual for economic conditions to be so weak but the housing market showing this really strong trend," Owen said of the February re-acceleration.
Despite facing 13 consecutive interest rate rises since May 2022, the property market has shown resilience, spurred by optimism over potential rate cuts later in the year and positive inflation news.
The limited supply of dwellings in comparison to the demand is a major driver behind the price growth, with factors such as high levels of net overseas migration and delays in new construction due to industry constraints playing significant roles.
In Melbourne, the property market is notably vibrant, with real estate agents noting an increase in buyer interest ahead of anticipated rate cuts.
Despite the current upward trend, there are several factors that could yet limit growth, including a softening economy, potential delays in rate cuts and rising unemployment.
Rate reduction will help
Investors are still lured, however, by the possibility of a cash rate reduction towards the end of 2024, which would boost to housing market yet again by making it accessible to first-time home buyers looking to enter the market.
The next meeting of the Reserve Bank is scheduled for March 18-19, with most economists not expecting a rate cut until the latter half of the year.
The interplay of buyer optimism, supply constraints, and economic challenges continues to shape the Australian housing market's trajectory, presenting a complex landscape for both buyers and sellers.