The Reserve Bank of Australia’s (RBA) extraordinary monetary tightening, which has delivered Australia’s steepest rise in interest rates in history, has failed to dampen Australia’s housing market.
CoreLogic’s daily dwelling values index, which tracks price changes across the five major capital city markets, rose another 0.34% in the week ended 29 June.
This was the 17th consecutive weekly increase:
The week’s increase at the 5-city aggregate level was broad-based, with all major capital cities recording value growth:
With one day left in June, home values have risen by 1.24% over the month at the 5-city aggregate level, with all major capitals recording value increases:
Meanwhile, the quarterly rate of growth has increased to 3.5% at the 5-city aggregate level, with Sydney values surging by 5.0% over the quarter:
Finally, since bottoming on 7 February 2023, home values have increased by 4.4% at the 5-city aggregate level, driven by a 6.8% rise across Sydney:
The strength in the housing market is also reflected in auction clearance rates.
The final auction clearance rate was 68.6% across the combined capital cities last weekend, driven by Sydney (70.0%) and Melbourne (67.5%):
While this was “the third week in a row where the combined capitals clearance rate was below 70%” and “the lowest in eight weeks” excluding the King’s Birthday long weekend, the next chart shows that shift lower is moderate in response to the RBA’s latest rate hike:
Westpac recently labelled the current house price recovery as extremely unusual, owing to the fact that it has occurred despite continued interest rate increases and low transaction volumes.
“Housing recoveries typically only emerge once the RBA is actively cutting rates or is very clearly poised to do so. Price gains also tend to follow a sustained lift in turnover, not vice-versa”, Westpac said.
Mortgage rates have doubled since the RBA began tightening, and borrowing capacity has reduced by around one-third.
Despite the RBA’s aggressive tightening efforts, the positive dynamics of record immigration, increasing construction costs, and limited stock on the market have produced FOMO (fear of missing out) and continue to push house prices upward.
