RBA leaves interest rate on hold

While Perth prices continue to rise steeply, they are increasing consistently, which suggests there is very little change to underlying property dynamics that impact values. Consistent is very much the theme for this week’s figures. Prices increased by 0.5% last week and are up by nearly 16% for the year and 33.3%, or a third since the beginning of 2023. This growth equates to a weekly median price increase of $3,700 and a median house value in Perth of $769,000. If the growth rate continues for the rest of 2024, values will have increased by 26%, and the median price will be around $847,000.

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The increase in weekly median house price growth so far this year has been remarkably consistent. The current weekly average since the beginning of April is just above $3,600, and the following chart illustrates the limited variance between the weekly increase (blue vertical bars) and the average (orange horizontal line).

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However, the above chart is somewhat misleading because we have applied the average in the first week of August to the entire period. Looking at how the average changed over the same period in the next chart, we can see a 12% increase, which is significant considering this is an average.

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The consistent steepness in price growth is driven by the undersupply of housing in the face of strong demand, including eastern state investors, and the limited addition of new stock. As a result, we are witnessing a historically low supply of established houses listed for sale. The following chart indicates little sign of the gap between sales (demand) in orange and listings (supply) closing. Therefore, we anticipate that the consistent steep price rises will continue.

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One dynamic that could slow Perth’s real estate juggernaut is a rise in interest rates. However, earlier this week, the RBA left rates on hold, and the next possible move is not until later in September. As we wrote last week, rates would likely be left on hold because of the recent inflation data. Furthermore, the drama in the US and global stocks and increased geopolitical tensions in the Middle East would have also encouraged the RBA to act cautiously.

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The RBA Board said in a statement,

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“Financial markets have been volatile of late and the Australian dollar has depreciated. Geopolitical uncertainties remain elevated, which may have implications for supply chains.”

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That caution, however, does not extend so far as to have the RBA looking for a rate cut in the near term. They made this very clear with Governor Michelle Bullock, stating,

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“Based on what I know today ... what we can say is that a near-term reduction in the cash rate doesn’t align with the board’s current thinking.”

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Overall, the RBA is non-committal on the likely next move, saying they are “data-dependent”. Mortgage holders will have to see what the next inflation and unemployment figures hold.

Review by Ryan Brierty .