Australia Housing Market Slows Amid Higher Borrowing Costs

Australia Housing Market Slows Amid Higher Borrowing Costs

Australia: Australia's housing market has recorded its sharpest slowdown since the pandemic as higher borrowing costs and changes to tax incentives have weakened market activity. House prices in Sydney and Melbourne have fallen by nearly 5% since the beginning of the year, accompanied by lower auction clearance rates, reduced loan enquiries and declining property sales. The slowdown is expected to affect related industries, including real estate services, construction and home renovations, while state governments are anticipating lower stamp duty revenue. The New South Wales Government has reduced its stamp duty revenue forecast by AUD 5.3 billion (USD 3.7 billion) over the next four years.

The housing market has slowed following three interest rate increases by the Reserve Bank of Australia between February and May, introduced to address inflation. Reserve Bank Governor Michele Bullock said, "The housing market is a bit of litmus test" for whether financial conditions are tight enough to bring inflation back down. She added, "If it looks like that inflation is not coming down, then I think the board have some difficult decisions to make." Bullock also noted, "we have seen the housing market slow more than we were expecting." Despite the recent decline, Australia's residential property market remains significantly above pre-pandemic levels, with the value of the country's housing stock having increased by 87% since 2020.

Source: Reuters