SYDNEY: Sydney home values climbed to a record high in June as strong demand and low supply levels overshadowed increasing pain from high borrowing costs.

Bellwether Sydney’s dwelling values added 0.5% in the month, taking the median to a fresh high of A$1.17mil (US$780,000), property consultancy CoreLogic Inc said in a report yesterday.

Overall, dwelling values rose 0.7% in Australia’s major cities. Melbourne fell 0.2% and Perth was the best performing state capital with a 2% gain.

“The persistent growth comes despite an array of downside risks including high rates, cost-of-living pressures, affordability challenges and tight credit policy,” said Tim Lawless, research director at CoreLogic.

“The housing market resilience comes back to tight supply levels, which are keeping upwards pressure on values.”

Higher interest rates, a shortage of homes and booming population growth have caused a housing crisis in large parts of Australia.

The problem is acute in Sydney where buyers are being priced out where an average home costs 13-times income.

CoreLogic’s national home value index has advanced 36.8% since the onset of Covid-19, despite the Reserve Bank of Australia’s aggressive rate hikes, with Sydney climbing 28.2% during that period.

The number homes advertised for sale in capital cities in the past four weeks was almost 18% below the previous five-year average, the report said.

New listings tracked 12% higher than a year ago, with stock absorbed almost as soon as it’s added to the market.

“The rise in new listings could be a signal that more homeowners are motivated or needing to sell,” Lawless said.

Bloomberg Economics expects the outlook to weaken as more sellers start to list their properties, particularly in Sydney and Melbourne.

“The return to a more balanced market, along with elevated interest rates, is likely to suppress price hikes,” economist James McIntyre said in a note.

“Gains should remain lackluster in Sydney and Melbourne, where affordability is a question for many buyers.”

 - Bloomberg