Australian home prices surged 8% in 2023 but rates, inflation cloud outlook
2024.01.01 08:56
© Reuters. Residential homes can be seen in the inner west suburb of Enmore in Sydney, Australia, July 19, 2015. REUTERS/David Gray/File Photo
SYDNEY (Reuters) – Australian home prices rose last year, a significant turnaround from the 5% dip seen in 2022, but interest rate hikes and persistent cost of living pressures have somewhat slowed the pace of growth through the final months of the year.
Figures from property consultant CoreLogic out on Tuesday showed prices nationally jumped 8.1% in 2023, but well below the 24.5% surge recorded in 2021. Prices in December nudged higher by 0.4%, the smallest monthly gain since February.
Sydney boasted a 11.1% annual rise but were still 2.1% below their January 2022 peak, with a median home value of just under A$1.13 million ($769,530).
Most other cities surged, with Perth up 15% and Brisbane 13%, while Melbourne prices rose only 3.5%.
But CoreLogic analysts said along with higher rates and inflation, affordability challenges, rising advertised stock levels and low consumer sentiment have taken some heat out of the market through the second half of last year.
That is expected to continue into the first half of 2024, CoreLogic Research Director Tim Lawless said in a research note.
The Reserve Bank of Australia (RBA) had in November hiked rates by a quarter point to 4.35% amid worries inflation expectations could become un-moored. It has jacked up interest rates by a whopping 425 basis points since May last year.
Australian households are under broad financial pressure from high inflation, which spiked as high as 7.8% last December, before slowing to 5.4% in the third quarter, but RBA believes the vast majority of borrowers can service their mortgages.
The trajectory of interest rates through 2024 will be a key factor influencing housing trends though data suggests another hike was “looking increasingly unlikely”, Lawless said, adding any rate cuts could help stoke demand later in the year.
“If interest rates do move lower, there is a good chance we will see a lift in consumer sentiment and a more positive trend in housing activity and values through the second half of the year.”
($1 = 1.4684 Australian dollars)
