If you think property prices might drop and are waiting to invest, you might want to reconsider.
As of August 2023, Australia’s property market has exceeded a value of $10 trillion, driven by consistent valuation increases across capital cities.
While many are hesitant to jump in, hoping that rising interest rates will lead to lower prices, property values have actually risen for six consecutive months since April. The demand for housing shows no signs of slowing, fuelled by fewer people sharing accommodations and an increase in net migration. This, coupled with historically low supply, has created intense competition for properties.
With limited stock entering the market and migration inflows projected to surpass 450,000 people, it’s reasonable to conclude that prices are unlikely to stabilize anytime soon. The Reserve Bank is expected to maintain the cash rate following its meeting on Tuesday, September 24, keeping it at 4.35% for a full year, with the next meeting not scheduled until November 4-5, 2024.
The market remains uncertain about the timing of any rate cuts, with Australia’s largest lender, CBA, recently pushing back its forecast for the first cut to December 2024. According to Reserve Bank data, borrowers faced approximately $14.5 billion in scheduled mortgage repayments in June, with a significant 66% of this amount attributed to interest charges. Monthly repayments have collectively risen by around $5.5 billion since March 2022, when they totalled about $9 billion.
New research suggests that the first-rate cut could provide approximately $92 in monthly relief for borrowers with a $600,000 loan, and up to $153 for those with a $1 million mortgage, assuming 25 years remain on their loans. If there are as many as five cumulative rate cuts, monthly repayments could drop by $441 for a $600,000 loan and $736 for a $1 million loan.
On the auction front, 2,697 auctions took place across the capitals last week, marking the highest number of homes auctioned since the week before Easter (3,519). This volume represents a 13% increase from the previous week and stands as the fifth busiest week of the year thus far.
