| "The Market Shifts: Rising Rates Redefine the Housing Landscape" |
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“This points to a slowdown in
growth emerging across the country and a clear turning point in the cycle, as
rising interest rates weigh.”— Eleanor Creagh, REA Group Senior Economist
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"A Clear Turning Point: The Housing Market Faces New Realities"Story by Cameron Micallef
(See translation in Arabic section)
Sydney-Middle East Times Int'l: New data from REA Group reveals national home prices rose 0.3% in March, pushing the median value to $908,000. That’s a 9.4% increase from the previous year, adding roughly $94,800 to the value of the median home.
However, REA Group’s senior economist, Eleanor Creagh, cautioned that house price growth was starting to moderate.
“This points to a slowdown in growth emerging across the country and a clear turning point in the cycle, as rising interest rates weigh,” Creagh said.
While interest rates are holding back prices from rising further, a lack of available homes is preventing the market from taking a deeper dive. “Recent rate hikes will impact buyer sentiment, borrowing capacity, and worsen the already challenging affordability issues,” Creagh added. “However, factors like a strong labor market, population growth, and first-home buyer incentives continue to support demand.”
Regional Performance
Nationally, capital city prices were up 0.3% over the month, mirroring the overall trend. The median home value in these cities now sits at $1.016 million.
Brisbane led the pack, with a 0.7% monthly rise, followed by Perth (0.5%) and Adelaide (0.4%). Meanwhile, Sydney and Melbourne saw more modest increases of 0.2%, with early signs pointing to declines in certain areas.
“Price declines remain limited but are beginning to appear in select inner and middle-ring markets, particularly in Sydney and Melbourne,” Creagh explained. “The momentum has eased, with over three-quarters of SA4 regions showing deceleration in growth compared to February.”
Shifting Demand: More Affordable Units in Focus
Unit prices are also accelerating at a rate more than double that of houses, reflecting increased demand for more affordable housing. This trend is largely driven by tighter borrowing capacity due to higher interest rates.
"Surging Fuel Costs Could Push Rates Higher"
As the housing market slows, economists warn that surging fuel prices may trigger even more interest rate hikes. Westpac’s chief economist, Luci Ellis, who spent over 30 years at the Reserve Bank of Australia, predicts three additional hikes in May, June, and August. If accurate, this would push the cash rate to 4.85%, the highest level since the Global Financial Crisis.
“We believe the RBA will respond to this pricing behavior by tightening monetary policy more than originally anticipated,” Ellis said.
Fuel prices, which were around $US56 ($A82) a barrel prior to the Middle Eastern conflict, have now skyrocketed to over $US110 ($A160) per barrel. This price increase is already rippling through Australia’s economy, with businesses quickly adjusting their costs.
“It reflects the surprisingly rapid pass-through of higher fuel and other oil-derived product prices into other prices in Australia,” Ellis explained.
In an effort to mitigate the blow, the federal government has temporarily halved the fuel excise tax for the next three months. However, Ellis cautioned that this measure would only offer short-term relief.
“The halving of the fuel excise reduces the near-term inflation outlook, but a peak of 5.4% in the June quarter remains likely,” Ellis said. |
