Rate cut warning amid new home price record

Home prices across the country have hit a new high, amid a new warning on interest rates.

Home prices across the country have hit a new high, to exacerbate the cost of living crisis for struggling Australians.

According to PropTrack’s monthly Home Price Index released Tuesday, national home prices lifted 0.23 per cent in April to hit a new record. The national median dwelling value is now $774,000. That’s up 6.6 per cent year-on-year and up 40 per cent over the four years since the Covid pandemic started.

That news comes as the likelihood of more interest rate hikes increases due to stubbornly strong inflation, in a further blow to Aussie households.

And while the new home price record will come as welcome news to many homeowners, it again underlines the increasingly unaffordable nature of the real estate market for the average Aussie looking to buy a new home.

If there is any good news for prospective buyers, it is that the growth of home prices rise is slowing.

RELATED: Melbourne home prices languish while other capital cities climb

Aussie home prices have hit a new high. Picture: Supplied

“National home prices hit a new record in April, as strong buyer demand has outpaced the rise in new listings this year,” PropTrack Senior Economist and report author Eleanor Creagh said.

“While demand remains robust, the pace of price growth is beginning to slow.”

Record immigration has been identified as the main driver of housing price growth and inflation.

“Strong population growth, tight rental markets, low unemployment and home equity gains are stimulating housing demand,” Ms Creagh said.

“Meanwhile, the supply side of the housing market has fallen short in responding to substantial demand. Building activity is at decade low levels, exacerbating the housing supply shortage.

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“Despite some easing in population growth, this mismatch between supply and demand is expected to persist in mitigating the downward effects of affordability challenges and a decelerating economy. As a result, prices are expected to remain on the rise in the months ahead.”

According to the PropTrack report, prices in the combined capital cities rose 0.21 per cent to a new peak in April, with prices now up 7.19 per cent since April 2023. However, performance across the cities has varied significantly. All capitals bar Melbourne (-0.10 per cent) and Hobart (-0.24 per cent) saw prices rise in April, though the pace of growth has slowed since March in all cities except Adelaide and Darwin.

Perth and Adelaide remain the strongest performing markets and recorded the fastest monthly growth in April, up 0.83 per cent and 0.55 per cent respectively. Perth prices are up 20.16 per cent over the past year, while Adelaide has grown 13.99 per cent.

Sydney prices were up slightly 0.25 per cent last month and 7.24 per cent annually for a new peak median dwelling value of $1.081m. In Melbourne prices are up 1.1 per cent annually for a median home price of $805,000, down 3.39 per cent on their peak.

Darwin was up 0.17 per cent in April and 0.16 per cent annually, while Hobart was down 0.24 per cent over the month and up 0.16 per cent annually. ACT prices were up just 0.01 per cent for April and 2.1 per cent annually.

Prices in capital cities have outpaced regional areas over the past year. However, regional areas lifted 0.30 per cent in April to a new peak, outpacing the 0.21 per cent growth across the combined capitals. Regional NSW (+0.50 per cent), regional WA (+0.33 per cent) and regional Queensland (0.30 per cent) led growth in April.

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Home prices in Adelaide have grown 14 per cent over the past 12 months.

The overheated nature of the real estate market and ongoing inflation has meant anticipated rate cuts this year are unlikely and the RBA could even move to push the cash rate higher again.

Australia’s biggest lender the Commonwealth Bank has warned rate rises are now a “near-term risk”.

If that doesn’t eventuate, CBA’s head of Australian economics Gareth Aird said any rate cuts will likely come later than expected.

“We believe that incredibly strong population growth, driven by net overseas immigration, has put upward pressure on some important components of the Consumer Price Index (CPI) basket; most notably the housing‑related components. As a result, demand is stronger and so inflation is falling less quickly than otherwise,” Mr Aird wrote in a note.