Values rise as national property market experiences largest one-month increase since mid-2023

“Stronger housing demand at lower price points is likely a result of serviceability constraints at higher than average levels of investor activity, which is eroding purchasing power, and is likely a rebound in first home buyers taking advantage of the extended deposit guarantee,” he said.

Lawless warned that a surge in investor activity could force banking regulators to tighten lending rules, with loans to potential homeowners growing at the fastest pace in a decade.

A surge in interest-only loans to investors in the mid-2010s, when property prices in Sydney and Melbourne rose to double-digit levels, led the Australian Prudential Regulation Authority to impose a cap on the rate banks lend to investors.

This limit was 30 percent. The share of loans going to investors increased to 38 percent in the last three months.

While the outer suburbs of most capital cities continue to experience sharp increases in values, the biggest increases are in regional centres.

Over the past 12 months, values ​​in the north-west Victorian hub of Mildura rose by 18.7 per cent, in NSW’s north-west centers of Tamworth and Gunnedah by 13.4 per cent, and in Queensland’s Darling Downs there was a 17 per cent increase.

The biggest increase of 22.2 percent was in the city of Albany on the south coast of Western Australia, located 400 kilometers south of Perth.

Financial markets, which fully priced in the interest rate cut as of Christmas a week ago, do not expect further easing in monetary policy until the middle of next year.

The turnaround in interest rate expectations came after the September quarter consumer prices report showed headline and underlying inflation had accelerated in the last three months. New home inflation rose 1.2 percent in the quarter, almost 45 percent higher than pre-pandemic levels.

Capital Economics senior economist Abhijit Surya said the latest inflation data means the Central Bank will leave interest rates steady this week, but that does not mean further rate cuts are off the agenda.

“With unit labor cost growth on track to decline, the recent stickiness in services inflation is unlikely to continue,” he said.

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“At the same time, business surveys point to renewed disinflationary pressures in the goods sector. As a result, we believe the RBA will have the opportunity to make several further rate cuts in the second half of next year.”

ANZ’s Australian economics chief Adam Boyton also warned that the rise in headline inflation was due to one-off factors, many of which stemmed from government actions. These include a huge increase in council rates and charges, the end of electricity subsidies and a further increase in tobacco tax.

He said that the recent rise in unemployment will also be a cause for concern for the Central Bank.

“We expect the RBA to express some concerns about market sector services inflation next week, but the moderate easing in the labor market over the past year suggests some downward pressure is still likely in coming quarters,” he said.

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