Financial markets and many economists no longer believe that the Reserve Bank of Australia (RBA) will provide further interest rate relief. They now expect the official cash rate to remain on hold next year.
I am less hawkish. I expect the unemployment rate to trend higher amid the rapid expansion of the labour market via high immigration, which should outrun new job creation.
However, any interest rate relief is unlikely to arrive before the second quarter of 2026.
Despite the widely held perception that interest rates will remain on hold, Australians remain extremely bullish on house prices.
As illustrated below by AMP chief economist Shane Oliver, consumer house price expectations recorded in the latest Westpac consumer sentiment survey rocketed even higher in October to their highest level since the post Global Financial Crisis (GFC) price boom:
Source: Shane Oliver (AMP)
Westpac reported that 80% of survey respondents expect home prices to rise, a new cyclical high.
The bullish price expectations are being reflected in Cotality’s daily dwelling values index, which has surged higher, led by Perth, Brisbane, and Adelaide:
At the 5-city aggregate level, the 28-day price growth is tracking at its highest level since July 2023:
Demand is being fueled by strong investor demand, which is tracking at decade highs on the expectations of strong capital growth and the record-tight rental market:
First home buyer demand has also surged on the back of the Albanese government’s 5% deposit scheme for first home buyers.
At the same time, there is an acute shortage of homes listed for sale, following a 14.3% decline over the past year at the national level:
Source: Cotality
The decline in for-sale listings has been universal across Australia:
Source: Cotality
Strong buyer demand and restricted supply can mean only one thing: rising prices.
Therefore, Australians have good reason to be bullish about housing.
