Australia’s housing market has been on a tear, with Cotality’s daily dwelling values index surging by 1% over the past 28 days across the five major capital city markets, the strongest growth rate in two years:
The surge in home values follows the most bullish house price expectations in 15 years, according to Westpac’s monthly consumer sentiment survey.
Households were right to be bullish, with the Reserve Bank of Australia (RBA) delivering three 0.25% rate cuts, with more expected, and the Albanese government’s 5% deposit scheme for first home buyers taking effect on 1 October.
However, Wednesday’s disastrous CPI inflation data from the Australian Bureau of Statistics (ABS), which saw trimmed mean inflation soar by 1% in the September quarter and by 3.0% annually, has scuttled hopes of further rate cuts, at least for the foreseeable future.
In turn, it is likely that expectations for house prices will take a hit, with buyers likely to be less confident to bid up prices, knowing they are unlikely to receive further interest rate relief.
Even before Wednesday’s inflation shocker, the auction market was beginning to stall.
Last weekend’s final auction clearance rate declined to 66.7% across the combined capital cities, which was the softest result since the week ending 22 June (65.3%).
As illustrated below, the monthly average clearance rate in October also declined to 67%, marking the softest result since June 2025.
It will be fascinating to see how this weekend’s auctions respond to the news that rates are unlikely to fall for the foreseeable future.
How far can house prices, which are already historically expensive relative to income, run without the stimulus of additional rate cuts?
Are we nearing the end of the house price boom? And will it be followed by a Canadian and New Zealand-style bust?
