Australian House Prices Near Record High Amid Rising Interest Rates

Despite facing numerous challenges, Australian house prices are inching closer to record highs. The steady rise in prices is due to a combination of factors, including a gradual increase in the number of properties for sale and the pressure of higher interest rates. According to CoreLogic's recent housing data, there was a national increase of 0.8 per cent in September, with Adelaide, Brisbane and Perth leading the surge. This is remarkable, given that the housing supply in these cities remains about 40 per cent below the five-year average.

The median price of a home now stands at $1,110,660 in Sydney, $776,716 in Melbourne and $691,591 in Adelaide. Eliza Owens, Head of Research, stated that this puts Australia's housing market just 1 per cent below its previous high in April 2022. Despite four rate rises since the beginning of the year, housing values have started to climb again in early 2023. Owens attributes this to the extraordinary imbalance between supply and demand in Australia's housing market.

This situation has left many prospective first home buyers feeling frustrated. An example is Justine and Kester Rozario who have been searching for an affordable home for six months to start their future family but have yet to find one. They recently lost a bid on a three-bedroom property in Western Sydney, which sold for $1,249,000 — significantly above the reserve price.

Despite the relentless rise in prices, Mr Rozario remains optimistic that growth is slowing in Sydney. He observed fewer attendees at recent auctions compared to the past few months. His partner Justine noted that higher interest rates have impacted their borrowing capacity, prompting them to realign their goals. However, they remain hopeful about their ability to support their family.

The latest CoreLogic data supports Mr Rozario's perception of slowing growth in Sydney's market. Owens noted that while there is an overall shortage of listings, more homeowners have chosen to sell during the winter months. This has led to a consistent rise in new listings in Australia's housing market, slightly cooling the rate of price growth to 2.2 per cent through the September quarter, compared to a 3 per cent rise in June.

Adelaide recorded the highest capital gain at 4.3 per cent in the September quarter, followed by Brisbane at 3.9 per cent and Perth at 3.6 per cent. Sydney and Melbourne's property markets grew by 1 per cent and 0.4 per cent respectively in September.

A small post-war house in Marayong in Western Sydney recently sold above the reserve price at auction for $780,000. Real estate agent George Elias stated that the market remains robust due to demand outstripping supply. He noted, "There's a lot of buyers in the market and not a lot of properties up for sale."

On the other hand, the Hobart market saw a decrease of 0.6 per cent. Regional markets continue to trail behind the capitals, with every 'rest of state' region recording weaker growth conditions relative to their capital city counterparts over the September quarter.

For those considering using super to buy a house or buying investment property with Super, these market trends are important to monitor. An SMSF setup and buyers agent can provide valuable advice to navigate this challenging landscape and make informed decisions. As Australia's housing market continues to evolve, it remains crucial for prospective buyers and investors to stay informed and adapt their strategies accordingly.