Australia’s house prices climbed at a slightly slower pace in June — while still performing strongly in key cities — as sentiment showed signs of easing on the prospect of further interest-rate increases ahead.
The bellwether Sydney market advanced 1.7% and Brisbane by 1.3%, resulting in a 1.2% gain in Australia’s major cities, data from property consultancy CoreLogic Inc. showed Monday. A lack of supply has been the main driver of prices, CoreLogic said.
“Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply,” said Tim Lawless, research director at CoreLogic.
Prices rebounded earlier this year as a combination of limited supply, renewed immigration and signs the Reserve Bank was near the end of its tightening cycle bolstered demand. The RBA, after pausing in April, resumed raising rates and has warned there may be more hikes to come as it tackles inflation.
Sydney has led the revival in the housing market, climbing 6.7% from a January trough, with the city’s median home value rising at about A$4,262 ($2,828) a week, Lawless said.
The island state of Tasmania’s capital, Hobart, was the only city to record a fall in prices last month, down 0.3%.
The housing shortage and revival of prices has also driven up rents, with reports of prospective tenants bidding up prices in order to secure a property. CoreLogic said that while rental conditions “remain diverse across the nation,” there is growing evidence that rental growth is easing.
The national rental index increased a further 0.7% in June, holding well above the pre-Covid decade average monthly gain of 0.2%, but a deceleration and the smallest monthly increase since January this year.
Despite tight vacancy rates, “it’s likely the trend in rental appreciation will continue to moderate, simply due to rental affordability pressures forcing a change in rental household formation,” Lawless said.
“The early signs of a rebound in the average household size can already be seen in data published by the RBA,” he added.