If there was a word to sum up the current property market, particularly in Sydney, then “resilient” would be it! After the market posted a retreat that coincided with the introduction of the first of a number of interest rate rises last May of 2022, it has rallied in the face of further interest rate increases over the course of the 2023 March quarter. After 10 consecutive rate increases this is no mean accomplishment, considering that prior to the inception of the first cash rate increase last year the Reserve Bank hadn’t raised interest rates since November of 2010. What we can decipher from this is that there are factors beyond interest rates that are determining the current overall property market performance. Clearly the number one metric beyond any other that has dampened the overall effect of the interest rate rises is supply! The shortage in overall listing supply has actually worked to put a floor under property prices and when we take into account other important factors, such as the significantly increased migration levels since Covid measures were wound back, it’s completely understandable that property prices have stabilised. Many buyers that have been approaching the property market with too much caution have found that they are struggling to compete in what is a fairly competitive market for buyers given the current supply constraints. Hence when it was reported by Corelogic that the recent March quarter saw home prices rising nationally for the 3rd consecutive month, with prices in Sydney shifting north by 0.27% - more than any other Australian capital city, the news certainly put the market on notice. But for those of us on the ground it hasn’t really come as a surprise. Additionally, with the decision by the RBA to hold the cash rate at 3.6% it also sends a clear message that the RBA board are taking stock and assessing the economic impact of the rapid rate hiking cycle to date. Now whilst a pause doesn’t necessarily mean that the RBA won’t pull the trigger and raise the cash rate again, it does potentially point to a changing mindset by the RBA that’s reflecting the latest market trends. Based on the monthly CPI indicators, inflation appears to have potentially peaked and is now slowing faster than the RBA’s original forecasts. Now whilst there’s no guarantees that the latest March quarter results marks a turning point for housing values, it’s clear that the persistence of low supply, the tightest rental conditions on record and surging overseas migration are providing some positive momentum to housing markets. Furthermore, many economists believe that interest rates may potentially be entering a phase where they’re peaking for this cycle which would only serve to strengthen optimism in the property market. The performance of housing values will be an important trend to watch, as they’re a significant contributor to overall household wealth. The effects of this on consumer behaviour cannot be understated. If wealth effects from higher housing values trigger more consumer spending, this may have an impact on the trajectory of interest rates. If you’re considering selling or renting your home speak to our experienced team. With a thorough understanding of local buyer, tenant and local market trends we’re best positioned to help you on your journey. *Disclaimer: Please note, this report is strictly meant to be of an informative nature and does not constitute investment advice. Market Update 0411 330 208 jholvander@meridienrealty.com.au 2
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