Soaring interest rates, mortgage cliffs, more households in financial stress; it seems whatever is thrown at the real estate market at the moment is brushed aside as property prices keep rising. Property prices are now firmly on the move everywhere in Australia, having increased by 3.5% since the beginning of the year. This growth is expected to continue, and if it does, house prices will be back to their 2022 peaks within the next two months. THE PROPERTY MARKET IS THE BEST SINCE THE B BUT WILL IT LAST? The price growth had been fueled by strong migration, low listing volumes, and expectations the cash rate was at or close to a peak, however rents continue to skyrocket, retail spending goes on unabated and inflation refuses to budge. RBA Governor, Philip Lowe has been consistent that inflation is the most pressing issue and that rate hikes are necessary to reduce goods and service prices, despite the financial pressure it may cause some households. With the cash rate the highest since April 2012, interest rates are closer to their peak than not, and the shock of rate rises has lessened. High rates have seen the number of loans written for the construction of new property falling to the lowest level since 2008. This will see the number of homes commencing construction slow, as population growth accelerates. Additionally, a home shortage exacerbated by high construction costs will also underpin values as population growth increases. The arrival of around 235,000 people per year from overseas means around 100,000 homes or more need to be found. This comes at a time when the government is trying to address a shortfall of a million homes by building 200,000 a year. So it’s going to be at least a decade for that shortfall to be overcome. PRICE GROWTH HAS RETURNED NATIONALLY Median price by property type ($) – Australia 800K 700K 600K 500K 400K 300K 200K 100K 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Neoval Houses Units
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