(Bloomberg) -- Australian home prices stayed strong in September, driven by soaring demand and outweighing the impact of the central bank’s aggressive policy tightening campaign.
Sydney prices, the national bellwether, advanced 1%, down slightly from the previous month, property consultancy CoreLogic Inc. said in a report Monday. Adelaide led September’s gains — climbing 1.7%.
In the more expensive cities — Sydney and Melbourne — the broad middle of the market is recording the highest growth rate after previously being led by the upper quartile, CoreLogic said. Regional markets continue to lag capitals.
“Possibly we are starting to see renewed affordability challenges deflecting more demand towards the middle of the market where barriers to entry are lower,” said Tim Lawless, research director at CoreLogic.
The Reserve Bank has raised borrowing costs by 4 percentage points since May last year to take the cash rate to its highest level in over 11 years. The unexpected recovery in the property market is a potential worry for policymakers as households feeling wealthier are more likely to spend, adding to inflation pressures.
National home prices on the average are likely to see an 8% gain this year, with those in Sydney probably increasing at a faster clip of 12% and could take levels to near-or-record highs, according to Shane Oliver, chief economist at AMP Ltd.
“Our base case is that property prices will see a further rise of around 5% next year as interest rates start to fall,” Oliver said.
Despite the RBA’s concerns about housing, the bank is expected to leave its policy rate unchanged for a fourth straight meeting on Tuesday as it assesses the impact of its tightening to-date.
--With assistance from Niluksi Koswanage.
(Updates with economist comment. The previous version of this story was corrected to say RBA is expected to hold the policy rate for a fourth consecutive meeting.)
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