The Outlook For Home Prices Amid The RBA Rate Hike

Matt Bell of Oliver Hume states that the Reserve Bank of Australia’s latest rate hike is set to weigh on property sentiment and pricing in the short term. Bell observes an immediate slowing in house price growth following the rate rise, noting the shift in buyer and investor expectations was evident even ahead of the announcement. He holds that the immediate impact of previous rate cuts has yet to fully feed through the market, and a material undersupply of housing continues to provide fundamental support for prices. Bell points to continued population growth, especially with a potential resurgence in overseas migration, as likely to underpin demand.

According to Bell, inflation pressures remain a primary concern, with the RBA’s decision partly cemented by stronger-than-expected private demand and limited supply capacity in the economy. He suggests further rate increases could be forthcoming, possibly another in May, given that forecasts show underlying inflation remaining elevated through 2026. Bell highlights the challenge for the RBA to return inflation to their target band, pointing to sustained credit growth, especially among investors.

Regional property market variations persist, Bell suggests, with Perth, Brisbane, and Adelaide experiencing strong price growth due to limited land supply. Melbourne and Sydney, meanwhile, appear more sensitive to rate changes, though he expects national home values to maintain positive growth in 2024, albeit at a marginally slower pace.

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