Australia's Housing Market Slows Amid Rate Hike

The Reserve Bank of Australia's latest cash rate increase is expected to deepen the housing market slowdown in Australia, according to Cotality. The cumulative effect of four rate rises since February has cut borrowing capacity by almost AUD $90,000 for a household on a median income, equal to about a 9% drop in purchasing power.

The reduction comes as higher mortgage costs add to broader cost-of-living pressures and test borrowers with large debt burdens. Cotality's national Home Value Index peaked in March, one month after the current tightening cycle began. Since then, home values have fallen as buyers' access to credit has narrowed, affordability has worsened, and tax policy changes have weighed on some parts of the market.

The Reserve Bank's decision to raise the cash rate by 25 basis points had been widely expected. Inflation remains too high, recent readings have been stronger than the central bank anticipated, and labour market conditions, while easing, remain tight by historical standards, Cotality said.