URGENT UPDATE: Homebuyers in Australia are facing a crisis as surging property prices have completely negated the benefits of recent interest rate cuts. New data from property analytics firm Cotality reveals that home values skyrocketed by 1% in November, pushing the median dwelling price to an astonishing $888,941. This alarming trend follows a 1.1% increase in October and a 0.8% rise in September, leaving many first-time buyers struggling to enter the market.
Cotality’s research director, Tim Lawless, warns that while the November growth rate is slightly reduced, it may signify a crucial shift in market dynamics. “It really looks to be a very mixed result, a two-speed market that’s starting to emerge once again,” Lawless stated.
The numbers paint a stark picture across major cities. In Sydney, monthly growth eased from 0.7% to 0.5%, while Melbourne saw a dramatic drop from 0.9% to 0.3%. Meanwhile, mid-sized capitals like Brisbane are breaking records, with the city now boasting a median home price of $1,015,767 after a 1.9% rise. Adelaide also surged by 1.9%, and Perth experienced a notable acceleration at 2.4%. Other cities, including Canberra, Hobart, and Darwin, reported increases of 1%, 1.2%, and 1.9% respectively.
This surge in prices comes amid rising inflation, undermining hopes that the Reserve Bank will implement further rate cuts. Economists and bond traders are now predicting potential interest rate hikes in the near future. Lawless noted, “You’d have to argue Sydney’s affordability and serviceability challenges will be shining through here, probably putting a natural ceiling on how high prices can go.”
Despite three recent cash rate cuts totaling 75 basis points since February, the benefits are quickly fading. Lawless calculated that these cuts had increased a median income household’s borrowing capacity by $55,000, yet home values have simultaneously surged by $60,000.
For renters, the outlook is grim, as affordability worsens across all capital cities. The national rental index has soared by 5% over the past year, marking the highest annual growth rate in a decade. “It’s definitely bad news for renters, especially with vacancy rates hovering around 1.5%, which is virtually at record lows,” Lawless emphasized.
Australia continues to grapple with a supply shortfall, and constraints on developers are hindering government efforts to increase the availability of social and affordable housing. As migration levels normalize, demand is expected to soften, with many renters opting to form larger households or remain in family homes to cope with rising rental costs.
This developing situation underscores the urgent need for immediate action to address the housing affordability crisis facing Australia today. Homebuyers and renters alike will be closely watching how these trends evolve in the coming months.
