SYDNEY (Reuters) – Australia’s property prices hit a record high in March after the first rate cut in over four years bolstered buyer sentiment, although it remains unclear if the upward momentum will last due to affordability issues.
Figures from property consultant CoreLogic, which will soon rebrand to Cotality, showed prices across the nation rose 0.4% in March from February to a new peak price of A$820,331 ($515,332).
The monthly rise was broad-based, with every capital city posting a positive chance except for Hobart. Prices in Sydney rose 0.3% while Melbourne gained 0.5%.
“Improved sentiment following the February rate cut is likely the biggest driver of the turnaround in values,” said Tim Lawless, CoreLogic’s research director, adding that the cut led to a slight improvement in borrowing capacity and mortgage serviceability.
“With the rate-cutting cycle expected to be drawn out, it will be interesting to see if this positive inflection in values can last in the face of affordability constraints.”
Australia’s property market has ended a year-long slide earlier than anyone thought, boosted by strong immigration and limited supply.
It felt the weight of decade-high interest rates late last year, but a quarter-point rate cut from the Reserve Bank of Australia in February injected some confidence and helped end a very shallow three-month decline.
The RBA is widely expected to hold steady at 4.1% at a policy meeting on Tuesday.
Swaps, however, imply three more rate cuts this year to 3.35%, likely from May onwards.
CoreLogic said even factoring in the three bullish rate cuts this year, interest rates are still restrictive.
“Until home loan serviceability improves more substantially, it’s hard to see housing markets moving into a material growth trend,” it added.
On the other hand, factors supporting prices are cost-of-living relief from the government, income growth and a strong labour market, said CoreLogic.
(Reporting by Stella Qiu; Editing by Stephen Coates)
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