Weakness could emerge in Australian house prices in the second half of 2024, especially in Sydney and Melbourne, with the Reserve Bank of Australia potentially keeping interest rates on hold until the year’s end given the persistence of inflation across the nation.
Eventually, however, the relatively high level of interest rates could cap growth in house prices, especially in the eastern states of Australia including NSW and Victoria, as credit costs continue to mount. The average mortgage size in NSW reached $744,000 in March 2024, well above that in Victoria at $590,500, and compared to an Australian average of $608,000.
While both the unemployment and underemployment rate have been rising slowly, they remain at historically low levels. Having said this, inflation is falling and heading in the right direction – probably slower than what the RBA wants. People are still spending, so inflation could remain high for the remainder of the year about the central bank’s 2 per cent to 3 per cent band.