Amidst aggressive interest rate hikes by the Reserve Bank of Australia (RBA) over the past months, high-level inflation, as well as the ongoing impact of international conflicts, house prices have continued to rise for a fourth consecutive month over the May quarter, with prestige properties setting new records.
People are influenced by negative media reports and look for signs that the market will turn. Auction clearance rates have increased to boom-time levels, there have been more buyers at open houses and bidding at auctions. But those hoping for a return to the hights of 2021 might be disappointed.
During the 2021 property boom, the median home price rose 23.7% – twice the rate of a ‘standard’ boom. Interest rates were low and buyers were able to borrow more than they ever could. As interest rates rise, borrowers can’t get the same amount of finance they used to. In places like Sydney, where the median house price is way too high, future gains are capped by this development.
There’s a record number of new immigrants coming into the country. The number of new arrivals typically affect rental demand, but a tight rental supply now means a spillover into sales. There’s a good chance this will keep housing prices up through the ‘mortgage cliff’ period between July 2023 and January 2024,when over 850,000 fixed loans will move from circa 2% rates to circa 6% rates.
Even though you’d expect some homeowners to feel the pinch of high rates, we think,demand will keep prices from plummeting drastically.
As with anything else in life, if you’re planning to hold onto your property and wait to see what happens with interest rates, you may want to be extra cautious, as market conditions created by the low supply of properties could change very quickly, as more listings hit the market during the traditional selling season.