Australian Home Prices: A Slowdown Amidst Resilience

The Australian housing market has been a resilient force, bucking the conventional wisdom that rising interest rates should dampen home price growth. Despite a 425 basis point increase in interest rates since May 2022, national home prices have grown for 17 consecutive months, up 6.2% since the tightening cycle began. However, the latest Domain House Price Report reveals a slowdown in the pace of quarterly house price growth to its weakest point in almost two years.

The slowdown in house price growth comes amidst a backdrop of tight housing supply, with stock for sale consistently shrinking in top-performing markets. In Perth, for instance, listings have fallen 36% since May 2022, fueling a strong seller's market with fewer choices for buyers. This undersupply of new homes, coupled with strong demand, has driven up prices across Australia.

However, the slowdown in home price growth serves as a reminder that housing supply plays a crucial role in determining the outcome for house prices. As new construction fails to keep up with demand, the housing market becomes more competitive, driving up prices. Policymakers should prioritize initiatives that encourage new housing construction and increase the supply of affordable homes to mitigate the slowdown in home price increases.



Regional market variations have significantly contributed to the overall slowdown in Australian home price growth. While the national median value increased 6.2% since May 2022, many regional areas experienced a slowdown in growth. Perth recorded the highest growth over the past two years with prices jumping 28.5%, but still fell behind the preceding two years' growth rate. Similarly, Brisbane's annual gains reached a two-year high of 16.9% but slowed compared to the previous quarter. These regional variations highlight the diverse performance across Australian markets.



Employment conditions, population growth, and rental market dynamics have influenced the recent changes in Australian home prices. The resilience of the Australian housing market to interest rate increases can be attributed to robust employment conditions, strong population growth, and tight rental markets. Markets like Perth, regional SA, and Adelaide experienced significant growth, with prices jumping 28.5%, 24.4%, and 21.0% respectively, fueled by limited stock on market. Conversely, markets with larger increases in listings, like Hobart and regional Victoria, saw price declines of 8.8% and 4.0% respectively.

In conclusion, the Australian housing market has shown remarkable resilience to interest rate increases, but a slowdown in growth is evident. As housing supply remains tight, policymakers should focus on initiatives that encourage new construction and increase the supply of affordable homes. Regional market variations and employment conditions, population growth, and rental market dynamics have significantly influenced the performance of the Australian housing market.