Australian property price growth hits five-month high! Rate cuts intensify competition, with a large number of buyers actively entering the market — Sydney auction clearance rate reaches 72%.

Week’s Key Focus

According to a report by the Australian Financial Review, Australian housing prices accelerated in February, posting the highest increase in nearly five months.

Data from CoreLogic indicates that buoyed by optimism over potential interest rate cuts later this year, housing prices across Australia rose by 0.6% in February, marking the fastest pace of increase in almost five months.

Tim Lawless, CoreLogic’s research director, stated that based on the data from the last two months, Australian housing prices are expected to continue on a path of moderate increase. Since the end of last year, as market expectations for one or more rate cuts strengthened, there has been a boost in real estate confidence. The subtle yet widespread acceleration in housing prices suggests a brighter outlook for property values. However, significant price increases are not anticipated until there is a substantial decrease in interest rates. Given the ongoing challenges of housing affordability, the rising unemployment rate, and a cautious lending environment, a significant rebound in housing prices is unlikely. Even though interest rates may be reduced this year, a rapid cycle of cuts is not expected, making this a very slow process that will take some time to return to pre-pandemic levels.

Pat Bustamante, a senior economist at St George Bank, remarked that despite high interest rates, the housing market’s improvement has support. The current pace of price increases surpasses the average level of February before the pandemic. This improvement is deemed sustainable. As the discussion shifts from rate hikes to cuts, along with talks on tax reduction policies, market confidence has improved. Last year’s surprise rate increases seem like a distant memory.

Demand from homebuyers is on the rise as they attempt to purchase homes before interest rate cuts lead to increased market competition. The shift in buyer confidence and the re-emergence of the fear of missing out have led to more people making offers before auctions to outbid competitors. In February, the average clearance rate at auctions across Australia exceeded 65%. In Sydney, the clearance rate remained above 70%, while Melbourne bounced back to around 65%. Despite a surge in listings, auction results remain strong, indicating that the pace of price increases in Sydney and Melbourne is accelerating.

However, Carlos Cacho, chief economist at Jarden, expressed that if listings continue to increase at the current rate, the momentum in housing price increases could slow down. With a 14% year-on-year increase in auction listings, it’s evident that seller confidence has also strengthened, but due to affordability issues and rising unemployment rates, especially if there are no rate cuts as anticipated this year, there might not be enough buyers.

Over the past year, housing prices in Sydney, Brisbane, Adelaide, and Perth have all increased by more than 10%, with Melbourne prices rising by 4% and Canberra by 1.6%. Nationwide, housing prices have risen by 8.9%.

Auction Results Last Week

Sydney: 851 properties were auctioned, with 563 auction results reported. Of these, 405 properties were sold, achieving a clearance rate of 72%. The total auction value was AUD 509,611,648, with a median house price of AUD 1,570,000.
Melbourne: 1144 properties went to auction, with 889 auction results reported. Out of these, 563 properties were sold, resulting in a clearance rate of 63%. The total auction value was AUD 481,668,761, with a median house price of AUD 1,030,000.