Australia’s housing market is about to sail past its previous record high, but the possibility of a cash rate lift and an injection of new properties for sale could keep future growth in check.
The housing market experienced a steady downturn throughout much of 2022 as interest rates started going up. But since January, home prices have recovered strongly, to the surprise of the Reserve Bank governor and many others.
The home value index released by real estate data firm CoreLogic is now half a per cent below its high reached last year, with several markets – including Brisbane, Adelaide and Perth – already finding new peaks.
Nationally, the index lifted 0.9 per cent through October, up from 0.7 per cent in September.
National home prices have already breached their former record high based on a separate index put together by PropTrack.
Yet CoreLogic research director Tim Lawless said the recovery in national home values was slowing when viewed quarter to quarter.
Mr Lawless said more stock was coming on the market, boosting choice for buyers. Stretched affordability was also keeping a lid on growth.
A limited supply of advertised homes had been playing a key part in the rebound but had already started picking up through winter – unusual for that time of year – with the seasonal peak still to come in late November.
The rapidly recovering property market is also a concern for the RBA, as households can spend more when they perceive a lift in their wealth.
The pace and scale of the housing market recovery has surprised RBA governor Michele Bullock, who chalked the rebound up to a number of factors, including the rising cost of construction nudging more people to buy an existing home rather than build one.
New home starts have been running well below normal levels and sunk another 4.6 per cent in September.
Building approvals are running at 167,000 a year, which AMP Australia deputy chief economist Diana Mousina said was way below the 225,000 needed each year. -AAP