The Sustainability of Australian House Price Trends Amid Global Shifts

⚡️ Highlights:

1. Housing prices in Canada and New Zealand are starting to decline, while Australia’s housing market is still growing, albeit at a slower pace.

2. Despite a decline in borrowing capacity and recent interest rate hikes, Australia’s house prices have continued to rise.

3. The auction clearance rate, which is a leading indicator for price growth, has been trending lower in Australia.

4. Another interest rate hike by the Reserve Bank of Australia could further weaken the housing market.

5. Australia’s population growth, fueled by an increase in temporary visa holders and a growing civilian population, is a key factor driving the strength of the housing market. As long as the number of buyers continues to increase, it is unlikely that there will be a significant decline in home values.

Analyzing the Resilience of Australia’s Housing Market in a Changing Economic Landscape

The Australian housing market, known for its robust growth and resilience, faces a pivotal moment as global economic conditions shift. This blog post, drawing on insights from Leith Van Onselen, Chief Economist at the MB Fund and MB Super, examines whether Australian house prices can continue their upward trajectory in the face of these changes.

The Current State of Australian Housing Prices

  1. Comparative Analysis with Global Markets: Recent data, as highlighted by Justin Fabo from Macquarie Group, shows that while housing prices in countries like Canada, New Zealand, and possibly the UK are showing signs of decline, Australia’s growth remains solid. CoreLogic’s daily dwelling values index records approximately 0.8% monthly growth at the 5-city aggregate level, with minimal fluctuations in recent months.
  2. Defying Economic Trends: Remarkably, Australia’s housing market has continued to thrive despite a significant decline in borrowing capacity, which preceded the recent interest rate hike by the Reserve Bank of Australia (RBA). This resilience raises questions about the future trajectory of home values in the country.

Factors Influencing Future Market Trends

  1. Impact of Interest Rate Hikes: The latest interest rate hike by the RBA has cooled the market slightly. Further rate hikes, potentially in December or February, could significantly impact buyer sentiment and market dynamics.
  2. Population Growth as a Driving Force: Australia’s population growth, particularly the surge in temporary visa holders and the civilian population aged 15 and over, has been a key factor in driving up house prices and rents. This demographic trend is likely to continue supporting the housing market.

Predictions for 2024 and Beyond

  1. Slowing Growth Rather Than Decline: Given the strong population growth and the current market dynamics, it is anticipated that Australian home value growth will slow down rather than decline outright as we head into 2024.
  2. Challenges in Developing a Buyer’s Market: The increasing number of potential buyers, fueled by population growth, makes it challenging for a buyer’s market to develop, even in the face of economic headwinds.

Conclusion: Navigating the Future of Australia’s Housing Market

The Australian housing market stands at a crossroads, with global economic shifts and domestic factors like interest rates and population growth influencing its direction. While a slowdown in growth is likely, the market’s resilience suggests that a significant decline is not imminent. Stakeholders in the real estate sector must stay informed and agile to navigate these evolving conditions effectively.

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