The Reserve Bank of Australia (RBA) continued its battle to bring down inflation in June, with its latest 25 basis point rise taking the cash rate to 4.1%.
Just over a year ago, in April 2022, it was 0.10%.
As a result of that tightening, mortgage costs have soared while borrowing power has fallen. Despite this, Australia’s property markets have, once again, proved their resilience.
That’s after CoreLogic’s national home value index gained 1.2% in May from April, its third consecutive monthly rise and the strongest monthly growth since November 2021.
But you might be wondering if the RBA’s latest hike will stop the property price rebound in its tracks.
And right now, Australia’s property market recovery is being driven by two big factors:
- Persistently low levels of supply
- Strong demand (relative to stock on market)
Housing supply is incredibly tight
Many would-be sellers have been holding off from putting their properties on the market with new listing volumes totaling just over 30,500 in the four weeks to 4 June, according to CoreLogic.
As the graph below shows, that’s 16.2% below the previous five-year average.
But while listing volumes are low, sales are creeping up, with 38,860 properties changing hands in May nationwide – close to the historic monthly five-year average of 40,000.
As a result, inventory is rapidly being depleted, with total stock on market down 28.6% in the four weeks to 4 June when compared to the previous five-year average.
Low stock levels are concentrating buyer interest. That, in turn, is driving competition and, ultimately, putting upwards pressure on prices.
Rising buyer demand
Talking of buyers, there are an increasing number of them in the market, thanks to a population surge that’s seen Australia add close to half a million people in the 2022 calendar year, according to the Australian Bureau of Statistics.
Meanwhile, construction levels are slowing, amid soaring building costs and higher interest rates. As a result, we simply aren’t building enough homes to meet demand, as the graph from AMP Capital below shows.
In fact, the National Housing Finance and Investment Corporation recently warned Australia was facing a shortfall of 106,000 homes by 2027.
So, chances are, supply constraints will likely support Australia’s property market rebound – at least in the short term.
The major banks agree, with Westpac, Commbank and ANZ recently revising their property market forecasts upwards
For instance, Westpac now expects values to remain flat this year (up from a 7% decline) with a 5% increase predicted for 2024 (up from 2%) – see the below chart.
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