Australia's housing market defied expectations as interest rates rose, experts say, but it's not likely to enter a boom when they fall.
House prices across capital cities were about 6 per cent higher year-on-year in January, according to property research firm PropTrack's latest Home Price Index report.
Brisbane and Perth were at their peak after posting growth of 10.71 per cent and 15.45 per cent respectively. Meanwhile, home prices rose about 6.78 per cent in Sydney and 10.52 per cent in Adelaide, while growth in Melbourne and the ACT was more subdued at less than 1 per cent.
Hobart and Darwin were the only two capital cities where house prices dropped, recording year-on-year falls of 2.41 per cent and 1.47 per cent respectively.
This came over a period when the Reserve Bank of Australia hiked the cash rate target from 3.10 per cent to 4.35 per cent — a 13-year high that could fall to 2.85 per cent by June next year if continues to cool, .
Experts say the growth defied the expectations of some property market observers who forecast prices would fall as interest rates rose.
And they don't believe the market will be turbocharged even as borrowers regain more borrowing power as rates fall.
Cameron Kusher, PropTrack's director of economic research, said last year's home price growth was driven by , and fewer property listings in some parts of the country like Brisbane and Perth.
Kusher also believed that would have spurred some to get into the home-buying market, increasing the competition amid low stock levels.
In Sydney and Melbourne, however, PropTrack observed a "big uplift" in new listings which took some heat out of the local markets.
"And if we look at the data from APRA [Australian Prudential Regulation Authority], which looks at who's borrowing, we have seen more activity from people with larger deposits," Kusher said. "So you're seeing more lending to people who are fairly comfortable and probably not impacted by higher interest rates as other buyers."
Research director at property data company CoreLogic, Tim Lawless, echoed Kusher, but said it was "surprising to see housing prices responding positively" amid an environment of higher interest rates, a cost of living crisis, challenging housing affordability, and low consumer sentiment.
What might happen to house prices as rates fall?
This will almost certainly be a "net positive" for the housing market, Lawless said. But he doesn't see it "turbocharging" because interest rates aren't the only factor at play.
"We know that housing affordability is already really challenging, and that in itself is probably going to be a key factor that prevents the market from booming," Lawless said.
"The other one is that interest rates are coming down from quite a high 10-year average; so even if they are to drop a couple of times this year, they're still on the higher side."
Kusher said home buyers will see increased borrowing power when rates fall, and while that "does tend to lead to higher property prices", it was important to look at the macroeconomic environment.
"The economy's certainly not as strong as it was," he said.
"And I think that will give people pause for thought about whether it's a great time to be going and buying and taking out hundreds of thousands, or even a million-dollar mortgage."
