Despite dozens of interest rate hikes, property prices in Australian cities have risen by double digits in less than a year.
This comes as record-breaking immigration coincides with a 40 percent drop in building permits in just over two years as construction companies collapse.
Sydney, the recipient of a large share of overseas migration, saw its average property price rise 10 percent to $1.397 million in the year to October.
The CoreLogic data also showed a 12.1 percent increase since January, highlighting how the market bottomed out earlier this year and has risen for nine straight months since.
House prices in Australian cities are rising by double digits in less than a year despite dozens of interest rate hikes (pictured, a Sydney auction).
In Brisbane, the median house price has risen 10.3 per cent to $860,465 since the start of 2023, putting it further out of the reach of average earners.
In Perth, Australia’s most affordable state capital market, the average house price rose 11.1 percent to $660,069 since January.
Melbourne, another major recipient of foreign immigration, saw a more muted 4.1 percent increase since January, taking the average house price to $937,736.
But the double-digit house price increases since the start of 2023 in Sydney, Brisbane and Perth have taken place despite the Reserve Bank of Australia raising interest rates 12 times since May 2022.
Another rate hike is expected on Melbourne Cup Day next week, which would take the key rate to a 12-year high of 4.35 per cent, with inflation of 5.4 per cent in September still well above the RBA’s target of 2 up to 3 percent.
Property values are rising despite the sharp increase in monthly mortgage repayments over the last 18 months.
AMP chief economist Shane Oliver said house prices had risen as the supply of new housing failed to keep up with rapid population growth.
“Australian house prices rose again in October, with the lack of supply attributed to record immigration,” he said.
“The price increase reflects a much greater-than-expected shortfall in supply relative to underlying demand for homes, as immigration increased again, driving the strongest population growth since the 1950s, at the same time as the supply of new homes slowed.”
“This exacerbated already tight rental markets, driving up rents and causing tenants to consider buying.”
In the year to August, 413,530 permanent and long-term migrants arrived in Australia.
This net intake, including skilled migrants and international students, is expected to exceed the 315,000 figure forecast in the Treasury’s May budget for 2023-24.
Only 168,231 private homes were built in the last financial year, of which 27,213 were completed in June 2023, an 11 percent decrease from 30,685 in March 2022.
With an average of 2.5 people per house in Australia, the 420,578 people they would theoretically house was well below the annual population growth of 563,200 in March, which includes both net overseas migration and births minus deaths.
The housing shortage is expected to continue as 8,338 new homes were approved in September, a significant 39 percent decrease from 13,717 in May 2021, when Australia was still closed to foreigners.
The slowdown in new homes, both under construction and completion, is also due to higher construction costs leading to the collapse of construction companies.
CoreLogic research director Tim Lawless said while Sydney prices reflected the rise in overseas migration, house prices in smaller capital cities rose due to interstate migration.
In the year to August, 413,530 permanent and long-term migrants arrived in Australia. This intake, including skilled migrants and international students, is expected to exceed the 315,000 forecast in the Treasury’s May budget for 2023-24 (pictured at Wynyard station in Sydney).
Rapid population growth is also accompanied by a decline in new home completions and building permits (pictured shows homes under construction in Oran Park in Sydney’s outer southwest).
The housing shortage is expected to continue as 8,338 new homes were approved in September, a significant 39 percent decrease from 13,717 in May 2021, when Australia was still closed to foreigners
“In addition, Perth and Brisbane are benefiting from positive interstate migration, which is likely to support purchasing demand more directly than outbound migration,” he said.
Sydney residents are moving to smaller capital cities and regional areas to escape congestion caused by rapid population growth.
The Regional Australia Institute said 80 per cent of Australians leaving a major city for a region in the year to September came from Sydney. Data is based on Commonwealth Bank customer accounts.
The group’s chief executive Liz Ritchie said this showed people were moving for lifestyle reasons.
“It suggests that the larger our cities become, the stronger the appeal of our wonderful regions becomes,” she said.
Property prices rise in October despite interest rate hikes
SYDNEY: Up 12.1 percent since January, 10 percent annually to $1,396,888
MELBOURNE: Up 4.1 percent since January, 2.2 percent annually to $937,736
BRISBANE: Up 10.3 percent since January, 7.5 percent annually to $860,465
ADELAIDE: Up 6.7 percent since January, 6.3 percent annually to $753,575
PERTH: Up 11.1 percent since January, 11.1 percent annually to $660,069
HOBART: Down 1.2 percent since January, down 5.1 percent annually to $705,919
DARWIN: Up 0.2 percent since January, down 1.3 percent annually to $578,704
CANBERRA: Up 0.5 percent since January, down 1.7 percent annually to $961,329
Source: CoreLogic median home prices for October 2023