Core Insights - Australian home prices increased by 0.8% in September, reaching a record median value of A$857,280 ($565,462), marking the strongest monthly gain since October of the previous year [1] - The quarterly increase in home prices was 2.2%, compared to a 1.5% rise in the second quarter [1] Market Trends - The monthly price gain was broad-based, with Brisbane experiencing a 1.2% increase and Perth seeing a 1.6% surge, while Sydney rose by 0.8% and Melbourne lagged at 0.5% [2] - The spring selling season is anticipated to be strong, driven by low stock levels and high buyer demand, which are expected to further lift prices through spring and into the end of the year [2] Economic Factors - The Reserve Bank of Australia maintained interest rates at 3.60% but has cut rates three times this year as inflation slowed [3] - A new policy from the Labor government allowing first home buyers to enter the market with just a 5% deposit is expected to increase demand [3] Rental Market - The rental market is tightening, with national vacancy rates at a record low and rents rising by 0.5% in September, leading to a quarterly gain of 1.4%, the highest since June of the previous year [4]

Core Viewpoint - Australia's home prices are projected to rise by approximately 5-6% over the next two years due to lower borrowing costs, although affordability issues may limit these gains [1][4]. Group 1: Home Price Forecasts - Analysts predict a 5% increase in home prices for this year, revised up from previous forecasts of 4% and 3.7% in earlier quarters [4]. - Home prices in major capital cities such as Sydney, Melbourne, Adelaide, Brisbane, and Perth are expected to rise between 4% and 7% this year and next [6]. Group 2: Impact of Interest Rates - The Reserve Bank of Australia's 75-basis point cuts since February have reduced mortgage repayments, supporting modest buyer activity [3]. - Rates are expected to bottom out at 3.1% early next year, down from the current 3.6% [3]. Group 3: Affordability Concerns - The national median home value increased by around 4%, from A$814,293 in January to A$848,858 in August, indicating high historical standards [7]. - Analysts are divided on purchasing affordability over the next 12 months, with some expecting modest improvements while others predict a worsening situation [8]. Group 4: Market Dynamics - Lower borrowing costs are anticipated to enhance household buying capacity, exerting upward pressure on the housing market [5]. - However, the chronic undersupply in the housing market raises concerns that increased demand could further exacerbate affordability issues [9].