Property Markets Slow as Interest Rates Rise

Weekly Real Estate Market Update with Leigh Martinuzzi 

There has been much to contend with over the month of April with long weekends, the announcement of an election, war overseas, rising inflation and, the prospect of future interest rate rises. This week the RBA announced its first interest rate rising since 2010, lifting the cash rate by 25 basis points to 0.35%. This is likely the first of a series of rate rises over the next 12 months as the RBA attempts to tackle high inflation. The reserve bank governor felt it was the right time to normalise interest rates from emergency lows, as there was mounting evidence that workers were starting to get bigger wage increases. What does this mean for real estate?

In the last few weeks, we’ve seen an obvious shift in the local property markets. While the numbers aren’t as high, there are still many buyers looking for property, however, buyer “urgency” has died and the time properties are sitting on the market increasing. After almost two years of the hottest market we’ve seen in decades, both buyers and sellers will have to adjust to the new state of the market. It is not all doom and gloom, however, we must manage our expectations. Across the board, many properties are now pushing out to 4 or 5 weeks on the market before finding the right buyer. The trick for property owners is to make sure their house represents outstanding value from the competition. This will help ensure they find their premium buyer quickly. 

I feel the string of long weekends pushed many of us out of routine, which may have had some impact on the buyer activity and sales transactions over the month of April. With the absence of COVID restrictions, I for one, was ready to make the most of a few additional public holidays. The call of the election always has an effect on economic activity. I’ve never really understood why, however, it’s apparent in many sectors that people just stop spending waiting to see the results. Historically, regardless of the outcome of the election, it never has much impact on the state of the property markets in Australia. Finally, and perhaps the biggest factor of concern, was the non-stop talk of rising interest rates. Many buyers are hesitant to commit to purchasing until they understand how increasing interest rates would affect them financially. 

The RBA’s cash rate increase will be passed on by all major banks in full. This means that for an average loan of $500,000 your monthly repayments will increase by approximately $65. For a $1M loan, that figure would be close to $130 per month. Over the next 12 months, the major banks are predicting interest rates will rise anywhere from 1.6% to 3%. Going on a rate increase of 2% would mean month repayments on a $500,000 loan will increase by about $512 and double that on a loan of $1M. It is easy to see why many buyers right now are waiting to see what the future holds. 

Over the month of April, the change in dwelling values increased by 0.6%. Sydney’s values dropped 0.2%, Melbourne’s values remained flat, and Brisbane’s values rose 1.7%. Australia’s regional markets are still outperforming our capital cities, which can be mainly attributed to lower-than-normal property availability sitting 42% below the five-year average while sales are said to 20% above the five-year average. The number of homes for sale in Brisbane this time compared to last year is 20% lower. Based on what I’ve seen coming to the market locally, I think we have seen similar shortages to that of Brisbane. I predict this will help keep local markets strong for a little while to come.

I don’t believe the market is dead. If anything, we are still in a very strong market, on in which we can still expect to see great prices achieved. However, gone are the days in which sellers will get flooded with many extraordinary offers as buyers no longer seem to be driven by FOMO. Buyers are happy to wait to see what the property market does over the next few months and happy to wait for the right property for them to come available. I think we will see some busy weeks ahead once the elections pass and as we move into mid-year. 

Grab a copy of the March Quarterly Newsletter here. 

Auction Clearance Rates (Preliminary). Week Ending 1st of May 2022

• Queensland – 63% (134/1237)
• NSW – 85% (529/1279)
• Victoria – 85% (749/1233)
• ACT – 78% (92/66)
• South Australia – 93% (90/379)
• Tasmania – N/A (0/183)
• Western Australia – 100% (2/750)
• Northern Territory – 33% (3/27)

*(Auctions/Private Sales)

REVIEW(s) OF THE WEEK 

Great results in a short time frame with Leigh Martinuzzi

Leigh made selling our home a breeze, from first contact Leigh was always very professional and knowledgeable about the local market, Leigh never promised anything he couldn’t deliver and kept us informed all the way through. Fabulous photo shoot provided a great platform to sell our much loved home and within a very short time frame, we had the result we were looking for. We would highly recommend Leigh if you are thinking of selling your house. – Palmwoods Seller