Against the predictions of many economists the Reserve Bank of Australia decided to pull the trigger on interest rates again today officially taking the cash rate to 3.85%.
Yet despite this, the property market has so far managed to shrug off these rate rises and has defiantly trended up nationally, with Sydney alone posting an impressive 1.3% increase in April and appears to be the capital city leading the rally with dwelling prices rising each month since February. Sydney values have trended 3% higher since their January trough, with four of the largest capital cities recording rises over the rolling quarter.
Overall, after falling nationally -9.1% between May 2022 and February 2023, Australian housing values have now posted a second consecutive monthly rise. But is this a sign that they’ve bottomed out?
CoreLogic’s Director of Research, Tim Lawless, believes the housing market is moving through an inflection point. “Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift. Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average,” he said.
Amid the growing imbalance between supply and demand Sydney house prices are trending up despite the challenging interest rate environment.
Additionally, there has been significant increases in overseas migration which have collided with the overall lack of housing supply to magnify demand pressures. Though overseas migration typically correlates with an increase in rental demand, it’s now reasonable to assume more people are speeding up their decision to purchase a property simply to secure a long-term housing solution as a result of being unable to find adequate rental accommodation in conjunction with rental prices galloping away. With vacancy rates at around 1% in most capital cities it’s easy to understand why there has been a greater sense of urgency in rental markets than ever before.
The supply shortage has been further exacerbated by an extraordinary reduction in the construction of new homes. The HomeBuilder scheme had created a pandemic construction boom, which subsequently collapsed amid skyrocketing material costs that led to the closure of many construction firms.
FAQs
Q: Has the Reserve Bank of Australia raised interest rates again?
A: Yes, despite recent predictions to the contrary and recent improvement in inflation figures, the RBA has increased the cash rate to 3.85%.
Q: Does the recent rise in property values mean the housing market has bottomed out?
A: According to CoreLogoc’s Director of Research, Tim Lawless, the housing market is going through an inflection point, with values stabilising or rising across most areas of the country, along with positive indicators.
Q: What is causing the growing imbalance between supply and demand in the housing market?
A: There has been significant increase in overseas migration, which has collided with the overall lack of housing supply, exacerbating demand pressures. Rental prices have also increased, leading more people to speed up their decision to purchase a property as a long-term housing solution.
Q: What is contributing to the supply shortage in the housing market?
A: The supply shortage has been worsened by a reduction in the construction of new homes, caused by the collapse of the HomeBuilder scheme amid skyrocketing material costs that even led to the closure of many construction firms.
* This information is general in nature and not intended to be financial advice.
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