Australia’s housing market is on the verge of a boom.
The weekend’s preliminary auction clearance rate surged to 77.9% across the combined capital cities, which was the strongest result since the last week of October in 2021.
Source: Cotality
Melbourne’s preliminary clearance rate was 78.6%, which was the strongest result since the week ending 24 October 2021.
Sydney’s preliminary clearance rate was 77.9%, which was the fourth-highest early result this year.
The jump in the combined capital city preliminary clearance rate follows the strong lift in the final auction clearance rate, which hit its highest monthly average level since June 2023.
The surge in clearance rates is being reflected in prices, with Cotality’s daily dwelling values index hitting its highest rate of growth over the past 28 days (0.9%) since October 2023:
Meanwhile, Westpac’s latest consumer sentiment survey showed that Australians have turned bullish on housing, with house price expectations hitting a 15-year high.
Westpac’s ‘time to buy a dwelling index’ has also rebounded sharply from its cyclical low:
Australians are right to be optimistic, as interest rate reductions are often followed with double-digit increases in home prices.
The upcoming implementation of the Albanese government’s 5% deposit scheme for first home buyers, which takes effect at the beginning of October, will help stimulate buyer demand by closing the deposit gap and expanding borrowing capacity.
Australian housing, which is now valued at more than four times the economy, is set to get even more expensive.
However, inflating home values even higher increases the probability of a greater correction later on, as has occurred in New Zealand and Canada.
I suspect that in a year’s time, once the latest batch of stimulus has been capitalised into prices, the housing market will be on the precipice of a severe downturn.
I discussed these issues in my latest podcast with Catherine Cashmore from Land Cycle Investor.
