According to the latest data from CoreLogic, the Home Value Index, which tracks the prices of houses and units in the country, experienced a national increase of 0.6 per cent. This surge was observed across all major cities except Hobart, with Perth leading the pack with a significant rise of 1.8 per cent.
Eliza Owen, CoreLogic’s head of research, noted the unexpected resurgence in the housing market, despite multiple interest rate hikes since May 2022, inflationary pressures, and escalating living costs, alongside a climbing unemployment rate. Owen attributed the modest rise in property values to buyer optimism fuelled by potential future rate cuts and positive inflation indicators. However, she underscored a fundamental economic factor: the imbalance between supply and demand.
The shortage of available dwellings relative to the number of interested buyers has been a driving force behind the continuous growth in house prices. Factors contributing to this include a decline in average household size, sustained levels of net overseas migration, and constraints in the construction industry hindering new builds.
Real estate agents, such as Luke Secco in Melbourne, have observed a resurgence in recent market activity. Secco reported heightened interest among buyers, particularly in anticipation of potential rate reductions. Despite a recent slump, Melbourne’s housing market saw a marginal uptick in February, reflecting renewed buyer confidence.
Looking ahead, economists remain cautiously optimistic about continued price growth in the short term. However, Eliza Owen highlighted potential counterbalancing factors that could limit this growth, such as economic softening, rising unemployment, delayed or increased interest rates, and reduced household saving rates. She emphasised the likelihood of a more stabilised growth cycle compared to the surging highs witnessed in 2021.
Prospective first home buyers may find encouragement in the prospect of future interest rate cuts, which could facilitate easier access to finance for purchasing property. A potential reduction in the cash rate by the end of 2024 could provide a significant boost to the housing market, particularly for renters seeking to transition into homeownership.
As the Australian housing market navigates through various economic pressures and uncertainties, the balance between market exuberance and external challenges will determine the trajectory of property values in the coming months. While short-term growth prospects appear favourable, the market remains susceptible to broader economic dynamics and policy interventions.
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