Rate cuts and short supply ignite housing market boom

A MIX of short supply, rate cuts, government handouts and pent-up demand will supercharge the spring selling season.

That’s the overarching verdict of housing industry analysis including Cotality, Proptrack and Ray White.  

The Cotality’s Home Value Index rose 0.7 per cent in August which was the strongest monthly gain since May 2024, pushing annual growth to 4.1 per cent.

Buyer demand is outpacing supply, the report noted.

Advertised listings are 20 per cent below average and auction clearance rates are hitting 70 per cent, which is the the highest since early 2024.

“Once again we are seeing a clear mismatch between available supply and demonstrated demand placing upwards pressure on housing values”, said Cotality Australia’s research director, Tim Lawless. 

“The annual trend in estimated home sales is up two per cent on last year and tracking almost 4% above the previous five-year average. 

“At the same time, advertised supply levels remain about -20 per cent below average for this time of the year.”

Proptrack senior economist Eleanor Creagh noted that 0.5 per cent August rise marked the eighth consecutive month of growth “taking home values to a fresh record high.

“National home prices are up 5.3 per cent over the past year, adding around $48,000 to the value of the median home,” Creagh said.

The three RBA rate cuts – and with the likelihood of further reductions – is building demand heading into the spring selling season, the economist said.  Auction clearance rates have strengthened and nationally enquiries per listing are at a three-year high.

Ray White’s Nerida Conisbee also highlighted that the housing market had responded quickly to August’s 0.25 per cent rate cut.

The national house price growth surged to 1.3 per cent monthly growth, which was a dramatic acceleration from July’s flat performance, according to Conisbee.

“The acceleration in price growth presents both opportunities and challenges for the market heading into the critical Spring selling season,” Conisbee said.

“Rising prices typically encourage more sellers to enter the market, and early indicators suggest listing volumes are beginning to increase as vendors gain confidence in market conditions.

“However, the supply response may struggle to keep pace with renewed buyer demand, particularly if the Reserve Bank delivers another cut before year’s end.

“This supply-demand imbalance could fuel further price acceleration, potentially pushing national annual growth well into double-digit territory.”