Australia’s property market remains strong, with home prices rising for the tenth consecutive month despite stubborn inflation delaying expectations of rate cuts. In October, national home values increased by 0.6%, driven by strong buyer competition during the peak of the spring selling season. This trend benefits sellers but adds pressure to the Reserve Bank, which must decide whether to hold or increase interest rates in response to ongoing inflation.
The continued price growth reflects a supply shortage across both capital cities and regional areas. According to the PropTrack Home Price Index, which monitors national real estate trends, median home values have risen 7.5% over the past year, equal to a gain of $65,200. Adelaide saw the strongest monthly growth at 1.2%, followed by Brisbane at 0.9% and Sydney, Perth and Hobart at 0.6%. Melbourne and Darwin rose by 0.5%, while Canberra posted a smaller increase of 0.4%.
Markets that trailed earlier in the year - including Sydney, Melbourne and Darwin - are now rebounding more quickly. Meanwhile, cities that had previously led the market - such as Brisbane, Adelaide and Perth - continue to grow but at a slower pace. Price growth in regional areas now closely matches that of capital cities as demand spreads beyond metropolitan zones.
This continued momentum comes even as the Reserve Bank signals a possible pause in rate movements at its next meeting. Inflation rose by 3.2% over the year to the September quarter, up from 2.1% the previous quarter. Increases in housing construction costs, energy prices and rents contributed to the higher figure. These ongoing inflation pressures make an interest rate cut unlikely in the near future.
New housing supply is not keeping up with population growth, adding further strain. Analysts predict only 170,000 new homes will be completed this year, while the population is expected to grow by around 420,000 people. This mismatch between supply and demand is pushing up both house prices and rents as more people compete for fewer properties.
Although many economists expect the Reserve Bank to hold interest rates for now, uncertainty remains. If inflation continues to rise above forecasts, further rate increases could follow in 2024.
