There was a lot of speculation around this, with some saying it wouldn’t happen and is unnecessary. But, after taking a pause in April, the RBA has lifted the interest rate again by 25 basis points. We are now sitting at a cash rate of 3.85%, the highest in 11 years. We’re not qualified to judge how many more rate rises we’re in for, but the figures seem to suggest that inflation is starting to plateau. If that continues hopefully the interest rates will follow suit!
What we’d like to talk about is the effect the latest rise will have on the housing market, and how the market is doing given the 11 near consecutive rate rises in the last year or so.
How the Rate Rise Will Affect House Prices
Anyone with a mortgage feels the crunch of these rates rises. Repayments increase, and you have less expendable income for your day to day needs. Similarly, borrowers trying to get into the housing market will see their borrowing capacity reduced. To put that into perspective, between now and when interest rates started to rise, we have seen a reduction of 30% in borrowing capacity.
So will this rate rise cast even more of a dark shadow over the housing industry?
Here at the Henry Wong Team®, we don’t think it will. There are still plenty of buyers out there, and we’re seeing strong demand for all our listings. The results for our sellers have been exceptional too, with happy vendors and buyers all round.
One reason for this is there are less homes on the market now than when the market was running hot during the pandemic times. Buyers are still out there, so the competition is high which keeps the market strong. Sure, the rise in interest rates might make some buyers wary, but it shouldn’t cause much more than a speed hump in the market.
This is reassuring for sellers out there. If the time has come for you to sell your home, the buyers will be there, and the price will be good.
House Prices Past Their Worst?
One of the Big Four banks, ANZ, has recently released a report saying it believes the housing property slump was short-lived and prices are past their worst. There simply wasn’t the massive crash that was predicted by so many.
“We expect capital city prices to end the year unchanged from December 2022 levels, before a modest rise in 2024,” the ANZ research unit posted. This is after property prices across the capital cities only fell by 9% over the last year, which is only around half of the fall that many predicted, including ANZ.
Changing their outlook in this way is a good indicator of how the property market in Australia has weathered the storm of the interest rate rises. Demand may have fallen from its (unsustainable) peak, but the buyers are still out there and they’re still looking to buy.
The strong demand is set to continue as the rental crisis in Australia shows no sign of abating. We’re also in the process of receiving huge amounts of international migrants to solve our worker shortages, which will place even more demand on the housing market.
This all comes at a time when new listings are at their lowest in the last five years, and total listings are at the lowest since 2010. The supply simply isn’t meeting demand.
Finding the Right Buyers…
It’s reassuring to know the buyers are out there, but it doesn’t mean they’re the right ones for your home. To find those sort of buyers, you need the right real estate agent. An agent who looks beyond the local area, and uses their massive network to place your listing in front of as many sets of eyes as possible.
Henry Wong has a network just like this, one that he has strategically grown over the years to include everyone from investment bankers to succession lawyers. It spans all of Queensland and Australia, with strong links to international networks, in particular the affluent Asian communities.
If you’re selling and you simply want to reach more buyers, let Henry leverage his network for you. Get in touch with him today.