Australian home prices hit a fresh record high in July, with more growth expected following the latest interest rate cut from the Reserve Bank of Australia (RBA).
The Westpac Consumer Sentiment Index, released on Tuesday, suggested that Australians have become extremely bullish on house prices, expecting significant increases in the months ahead.
As illustrated below by AMP chief economist Shane Oliver, consumer expectations for house price growth have reached a cyclical high. A growing number of households also believe that now is a favourable moment to purchase a home.
Their optimism is well-founded, given that interest rate cuts are typically associated with rising prices.
As the following chart from The AFR shows, Australian home values have typically increased by double-digit rates two years after the first interest rate cut from the RBA.
Financial markets and most economists expect the RBA to deliver another two or three 0.25% rate cuts by mid-2026, which will lift demand further.
The Albanese government’s 5% deposit scheme for first home buyers, effective 1 January 2026, will also stimulate demand and prices.
The upshot is that, despite shocking affordability, Australian house prices are destined to rise further, fueled by interest rate cuts and policy stimulus.
The cycle of larger mortgages chasing higher home prices will continue, further transforming Australians into mega-mortgage enslaved people and channelling more of Australia’s financial capital into non-productive housing.
I never said that Australia was a clever country.
