The housing market in Australia is showing no signs of slowing down, as house prices have increased for the sixth consecutive month in August, despite a significant increase in interest rates over the past year. According to property research group CoreLogic, the national home value index rose by 0.8% in August compared to July. This acceleration in price growth follows a two-month trend of slowing capital gains, indicating the resilience of the housing market.
Factors contributing to the continued rise in house prices include a surge in migration following the Covid-19 pandemic and a decrease in the supply of new houses. These dynamics have fueled demand for housing and are expected to support the upward trend in prices.
However, the increase in house prices could pose concerns for the Reserve Bank of Australia (RBA), which has implemented a series of interest rate hikes to combat inflation. The RBA has raised official interest rates by 400 basis points over the last year, but it remains cautious about the potential need for further increases if inflation persists.
Fortunately, there are signs that inflationary pressures are easing. Recent data revealed that the monthly consumer price index rose by 4.9% in the 12 months to July, lower than expected and down from a peak of 8.4% in December.
The rise in house prices is widespread across Australia, with every capital city experiencing an increase in dwelling values except for Hobart. Brisbane led the gains with a 1.5% increase, followed by Sydney and Adelaide with 1.1% increases.
Sydney has been at the forefront of the housing market recovery, with values rising by 8.8% since hitting a low point in January. Brisbane has also seen a strong recovery, with values up by 6.2% since February.
As the housing market continues to thrive, it will be important for policymakers to carefully monitor developments and assess the potential implications for inflation and the broader economy.