Aussie property prices surge despite rate hikes

Australia’s housing market has defied interest rate hikes and economic uncertainty with another spike in prices over February.

PropTrack data released Monday showed national prices rose by an average of 0.5 per cent for the month and are now 9.1 per cent, or nearly $90,000, higher than a year ago.

The rise suggested numerous economic headwinds, including the threat of further interest rate rises, failed to squash buyer appetite for houses and units, especially in medium-sized capitals.

Brisbane, Adelaide and Perth led the mainland market with rises of 0.6-0.7 per cent over the month and the median prices of dwellings in all three markets are now substantially higher than a year ago.

Perth dwelling prices had the strongest growth in the country over the past year with a rise of close to 20 per cent, or about $170,000.

Brisbane prices rose an average of nearly 16 per cent, or about $153,000, for the year, while the annual Adelaide rise was 15 per cent, or about $120,000.

Hobart recorded the largest monthly rise in prices at 1 per cent, with prices up nearly 9.1 per cent from a year ago, signalling a major recovery for what had been a struggling market for many years.

Rises in Sydney and Melbourne prices were more sedate by comparison, with the latter recording monthly growth of 0.3 per cent and annual growth of 3.4 per cent.

Sydney prices rose by an average of 0.5 per cent over February and 6.1 per cent for the year.

Sydney’s seemingly slower growth compared to smaller capitals still delivered close to $103,000 in average gains due to how high prices already were.

Experts attributed the price rises to a mix of low listings volumes, falling construction levels in many markets and above-average population growth.

The federal government’s First Home Guarantee Scheme, which helps eligible buyers transact with small deposits, has also been singled out as a major driver of price rises.

Julian Finch, a mortgage broker and the director of financial services group Finch Financial, said most people accessing the scheme since it was expanded in October were higher-income first-home buyers.

The October changes included a removal of salary caps and a raising of the price caps, which now reach as high as $1.5m in Sydney and $1.1m in Brisbane.

“(The scheme) has really increased competition,” Mr Finch said.

REA Group economist Eleanor Creagh credited the scheme, along with a push to more affordable markets, for driving faster rises in units relative to houses.

“Unit price growth outpaced houses, indicating demand is shifting towards more affordable stock,” she said.

She explained that this shift made sense in the contect of strong house price growth over an extended period, adding that “demand is facing into tight supply”.

Mr Creagh added that the fact so many Australian capital cities now have median house price above or approaching $1m was significant.

She noted that home prices in Perth, Adelaide and Brisbane are close to becoming double what they were only five years ago. “A $1m median represents a “significant shift in the housing landscape,” she said.

Ms Creagh described the national 0.5 per cent monthly growth rate as “fairly strong” but cautioned that this run may face upcoming hurdles.

“We will see growth slowing, especially with another rate rise,” she said. “We can expect growth over the coming period to be slower and more uneven”.

Ms Creagh said any slowdown in values was unlikely to be as rapid as in 2022, the last time Australia started a rate hiking cycle, when prices dropped nationally.