Australian dwelling values hit a new record high in August.
The national final auction clearance rate also averaged 69% in August, the strongest result since February 2024.
The bounce in dwelling values and auction clearance rates follows three 25 bp rate cuts delivered by the Reserve Bank of Australia (RBA) since February, taking the official cash rate down to 4.6%.
Financial markets are tipping another two 25 bp rate cuts by mid-2025, which would lower the cash rate to 3.10%.
The latest Westpac Consumer Sentiment Survey revealed that Australians have become highly bullish on Australian property.
As illustrated below by Justin Fabo from Antipodean Macro, house price expectations rose another 2.6% in September to a 15-year high:
While Westpac’s ‘time to buy a dwelling index’ retraced slightly this month, it has also rebounded strongly from its cyclical low:
Australians are justified to feel bullish on house prices. The following chart from CBA shows that home values typically experience double-digit growth following a rate-cutting cycle:
The Albanese government will also expand its First Home Guarantee scheme on 1 October, which will enable virtually all first home buyers to purchase a home with only a 5% deposit without requiring lenders’ mortgage insurance, with the government guaranteeing 15% of their mortgages.
The combination of lower interest rates and the First Home Guarantee scheme will inevitably drive up prices.
It also means that Australian housing will become structurally less affordable.
