Antipodean Housing Deep Dive

Ying and yang

Each month we take a graphical deep dive into the Antipodean housing markets.

Mention that interest rates will, or might, fall and Australians cannot help themselves.

Measures of monthly dwelling price growth bottomed in late 2024 and have increased since then. Interestingly, nationwide price growth has lost a bit of momentum in recent months according to PropTrack’s data which often lead Cotality’s more widely cited figures.

We suspect that this is a bit of a blip given another interest rate cut is in the offing at the RBA’s August Board meeting.

History suggests that we should expect dwelling price growth to outstrip growth in average household disposable income as interest rates decline.

That said, the already-elevated dwelling price-to-income ratio and our expectation for relatively modest monetary policy easing suggests that the current upswing in housing prices could be relatively moderate in an historical context.

Rising (real) housing prices should continue to incentive developers to build more housing.

Our view is that there remains significant excess demand for housing in Australia as clearly indicated by very low, and falling, residential rental vacancy rates.

This is again putting some upward pressure on growth in advertised housing rents.

In New Zealand, it’s a different picture. Despite relatively large falls in borrowing rates, the reaction across established and new housing markets has so far been relatively muted.

Kiwi housing prices have risen a little, though sales volumes have been a more responsive. The stock of homes for sale remains elevated and population growth has slowed significantly - quite a different story to Australia.

The number of home building consents in New Zealand has broadly moved sideways over the past year or so and declines relative to nominal GDP.

Full chartpack is below.