Australian house prices are already at their highest level in history and are beginning to surge higher.
According to Cotality, last week’s combined final auction clearance rate rose to 71.6%, which was the capital cities’ highest result since early June 2023 (73.1%). It was also the third time in five weeks that the final clearance rate settled above the 70% mark.
As illustrated by the following chart, the monthly average final clearance rate in September is also tracking at its highest level since May 2023, indicating stronger price growth.
Cotality’s daily dwelling values index is also experiencing a strong uptrend across all major capital city markets, rising by 0.8% at the aggregate 5-city level over the past 28 days:
The Reserve Bank of Australia’s (RBA) three 0.25% rate cuts are clearly driving the price rises. Financial markets are tipping between one or two more rate cuts by mid-2026, which should further stimulate price growth.
Analysis by CBA and the Australian Financial Review showed that dwelling values nationally typically rise by double-digit rates two years after the commencement of an interest rate-cutting cycle.
The Albanese government’s 5% deposit scheme for first-home buyers, which comes into effect next week (on 1 October), will further increase buyer demand and provide additional stimulus to house prices.
According to an analysis by Lateral Economics, the 5% deposit scheme is expected to drive up property prices nationally by an additional 3.5% to 6.6% in 2026 and for several years thereafter.
However, in segments targeted by first home buyers, which are defined as those below the scheme’s generous price caps, the impact is expected to be even more severe, with house prices tipped to rise by an additional 5.3% to 9.9%.
The combination of falling interest rates and government stimulus has made Australians especially bullish on house prices.
Westpac’s latest consumer sentiment survey revealed that house price expectations are at their highest level in 15 years.
Westpac’s ‘time to buy a dwelling index’ has also rebounded sharply from its cyclical low:
Cotality’s latest housing chart pack valued Australia’s total dwelling stock at an extraordinary $11.7 trillion spread across 11.3 million dwellings.
This means that the average home in Australia is valued at an absurd $1,035,000.
The last thing that Australia needs is for housing to become even pricier. Sadly, with lower interest rates and government stimulus, home values are about to become even more bubbly.
