Home Prices Rise Further, Affordability Continues Sharp Deterioration

CoreLogic home prices for Australia’s 5-capital cities rose 0.4% m/m in December to be up 9.7% y/y, but this was the lowest increase since the recovery began in February. They are now about 10.1% above the January 2023 trough. CoreLogic said the pace of increases has eased though due to deteriorating affordability, increased advertised stock, continued inflation pressures and soft consumer sentiment.

• In recent months there has been significant diversity between cities with Melbourne down 0.3% m/m in December but Perth +1.5% reflecting differences in affordability and supply.
• Assuming nominal disposable income rises in Q4 at the same rate as the average of the previous four quarters, housing affordability deteriorated further in Q4 2023. Our index is now over 45% below trend after 43% in Q3, the worst affordability since the series began in 1980. Usually when it moves further below trend, price growth also eases but currently the two are diverging with special factors weighing on supply and working age population growth of 3% y/y boosting demand. The RBA has also cited a decline in household size during Covid increasing demand too.

Source: MNI - Market News/Refinitiv