In May, Australia’s housing market recorded its highest auction clearance rate since early 2022, a strong 72%. That’s a big jump from the low-to-mid 60% range earlier in 2024. The increase is a clear signal that homebuyer confidence is returning, and the demand is picking up again.
But what’s really behind this sudden shift?
Trump Tariffs & Inflation
Recently, Donald Trump proposed 10% tariffs, which, despite being a U.S. policy, created a ripple effect in Australia. For example, economic uncertainty rose, shifting global interest rate expectations. In response, investors are shifting their focus to safer, more stable housing, especially in big cities like Sydney and Melbourne.
As a result, markets started pricing in more RBA rate cuts, and yesterday’s 0.25% rate cut fulfilled those expectations. Inflation, on the other hand, also pushed housing prices since it is above the target band of the RBA.
The RBA Rate Cut
The expectations for the RBA rate cut also fueled the demand for housing after the February rate cut. Since yesterday, the RBA has cut the rate by 0.25%, which has led to a rising housing market.
But it helped borrowers to borrow more with savings, such that on a $700k mortgage, they just need to repay approximately $130 per month. That’s over 1,300 a year back in their pocket.
Thus, these two major factors pushed the upward trend in the housing market with the rising demand.
New Housing Market Trend Now
This rise in demand has further shown up in housing prices, such as
- National house prices rose 0.4% in April, bringing the median to $917,433
- Unit prices increased 0.5%, reaching $685,637
- Perth stood out with 0.9% growth in April alone, and a 12.2% annual gain
On top of that, 13 out of 14 regions in Australia are now showing high price growth over the last 3 months. Moreover, the growing global uncertainty is also driving homebuying activity due to various reasons:
- Due to market volatility, homebuyers are moving to safe locations.
- The outlook for interest rates has also shifted, bringing more relief.
- Meanwhile, the Labour Government’s expanded 5% deposit scheme also enhanced support.
Together, these factors are making housing more appealing, even as global uncertainty grows.
Will This Be Another Covid-Style Boom?
Not quite. While the market is clearly lifting, we can say that we won’t see a repeat of the 2021 boom. But why? Because
- The cash rate isn’t going back to 0.1% like it did during the pandemic.
- Household savings are lower now due to ongoing cost-of-living pressures
- During COVID, people saved more simply because they couldn’t spend, and that’s not the case anymore.
That means demand is strong, but the pace of growth is expected to be more controlled this time around.
Conclusion
The auction clearance rates surged to tremendous heights of up to 72%, but that has cleared one thing, homebuyers are coming back. The two biggest reasons for this surge are the ongoing global tensions and the RBA rate cut. But that won’t be like what happened during Covid times, that’s because the cash rate isn’t too low at 0.1%.
So what does it all mean for you? Should you plan your next property investment or hold in?
Book a consultation call with Nfinity Financials for more information or connect with our mortgage team at 1300 GET LOAN, 0456 456 267.
