The Australian property market is making waves once again, rallying from a 10-month downturn.
Latest figures unveil a rise in aggregate home value indexes, ending a prolonged decline and sparking renewed interest.
Intrigued about the factors driving this change? Eager to understand the events that led us here?
Contemplating what’s in store for the future? Delve into our March Market Smart as we guide you
through the property market’s latest resurgence.
Probably… but here are a few things to consider:
Despite the RBA’s recent rate pause, it may take several months before the effect of the highest cash rate since 2012 will fully takes hold. 30% of existing home loans remain on fixed rates, meaning that a surprisingly high number of debtors are also yet to be exposed to higher interest rates.
With higher interest rates comes more stringent borrowing capacity assessment, and consistent rate hikes over the past year have reduced average household borrowing power by hundreds of thousands of dollars. This will limit the demand for real estate and ease upwards pressure on prices.
Despite being driven in large part by economic indicators, consumer sentiment is often reliably indicative of long-term market performance. Currently, the Westpac-Melbourne Institute Consumer Sentiment – “Time to buy a dwelling” – Index has fallen to an extreme low of 65.7. This is the weakest rating since 1989, when interest rates where at 17%. Furthermore, it seems as though this is being driven by expectations of looming price growth and a decline in affordability. The Westpac-Melbourne Institute House Price Expectations Index is now firmly in the ‘net-positive’ territory, at 111.7.
It remains to be seen whether the RBA will pursue subsequent rate adjustments throughout the latter half of 2023. Cash rate futures are forecasting an expected peak mid-year at around 3.645%, with a continuing decline across the remainder of 2023. This represents a tempering of expectations from just a few months ago, where markets were anticipating a peak closer to 4%.
Inflation remains well above RBA targets despite the first indications of decline arising in early March. Due to a variety of global factors, it seems likely that ‘sticky’ inflation (perhaps settling at around 5% in Australia) may become a trait of the global economy for the foreseeable future. RBA estimates do not predict a return to target inflation (2-3%) until mid-2025. This will have significant and lasting implications for real estate markets, with households both spending and saving less.
Despite the potential challenges and uncertainty ahead, it’s clear that the Australian property market is showing promising signs of recovery. Here at Search Party Property, we are well-equipped to help clients navigate this changing landscape and make data-driven, informed decisions about their property purchases. If you’re looking to enter the property market, get in touch with us today to discuss how we can help you achieve your goals.
In this month’s Market Smart, we’ve chosen Lawnton, QLD as our spotlight suburb, to highlight its exceptional investment potential. Lawnton’s median house price stands at $652,500, while the median rent comes in at $500. With a low vacancy rate of just 0.5%, Lawnton presents a compelling opportunity for investors.
The suburb boasts a diverse age demographic, a growing population and healthy rental demand. Lawnton’s combination of growth and stability make it an ideal candidate for further exploration. Get in touch today to secure your next investment property in this flourishing suburb!
At Search Party Property, we specialise in developing tailored investment strategies and will work with you to come up with a suitable plan of attack. We also regularly assess your strategy ensuring that it is fit for purpose and delivering the desired results.