Australian Housing Market Makes Slow & Steady Rebound
Australian home prices surged by 8.1 per cent in 2023, marking a significant rebound from the 5 per cent decline witnessed in 2022 but a notable slowdown from the robust 24.5 per cent surge in 2021, according to figures released by property consultant CoreLogic. While Sydney experienced an annual rise of 11.1 per cent, it remained 2.1 per cent below its peak in January 2022, with a median home value just under $1.13 million (Australain). Other cities, such as Perth and Brisbane, witnessed substantial increases of 15 per cent and 13 per cent, respectively, while Melbourne's prices rose by a modest 3.5 per cent. However, CoreLogic analysts noted that several factors, including higher interest rates, inflationary pressures, reduced affordability, growing advertised property listings, and subdued consumer sentiment, tempered the market's momentum in the latter half of 2023. Research Director Tim Lawless expects this trend to persist in the first half of 2024. The Reserve Bank of Australia (RBA) had hiked rates by 0.25 per cent to 4.35 per cent in November 2023, aiming to counter potential inflation risks. With a cumulative increase of 425 basis points since May 2023, households face financial strain amid inflationary pressures, which peaked at 7.8 per cent in December before easing to 5.4 per cent in the third quarter. Despite these challenges, the RBA believes most borrowers can manage their mortgage obligations. Lawless highlighted the pivotal role of interest rate movements in shaping housing trends, indicating that further rate hikes seemed improbable. Conversely, potential rate cuts could reinvigorate demand and positively impact housing activity and values in the latter half of 2024. The moderation in the pace of housing price growth reflects broader economic pressures, signalling a cautious trajectory for the housing market amid ongoing economic challenges and the evolving monetary policy landscape.
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