A decision by the Reserve Bank of Australia to increase interest rates is unlikely to impact property prices with a shortage of listings and high demand driving growth, according to the LJ Hooker Group.
A decision by the Reserve Bank of Australia to increase interest rates is unlikely to impact property prices with a shortage of listings and high demand driving growth, according to the LJ Hooker Group.
LJ Hooker Group’s Head of Research, Mathew Tiller, said strong population growth and tight employment markets have resulted in increased competition for homes adding buoyancy to the market.
“The RBA’s focus at the moment is on reducing inflation and the latest data show it is coming down but remains sticky and is not falling as fast as anticipated,” Mr Tiller said.
“Today’s decision shouldn’t lead to a flood of mortgagee repossessions hitting the market, but it is likely there will be homeowners looking to downsize their mortgage as a way of managing their household budget, so we are expecting listings to slowly rise.
“Property markets are more positive for homeowners who do decide to list with elevated auction clearance rates, rising prices and higher attendances at open homes all pointing to a stronger winter selling season. “
The latest CoreLogic figures show house price recovery continued for the third consecutive month up by 1.2 per cent in May. In Sydney, house prices increased by 1.8 per cent during the month and 4.8 per cent since January.
Listings remain below the five-year average and demand remains high due to increased levels of immigration and the return of international students. Strong rental growth, low vacancy rates and increased property prices have seen tenants consider making the switch to homebuyers, while investors are also back in the market.
Mr Tiller believes property prices have also benefited from buyers trying to pick the bottom of the market. In addition, there are owner-occupiers looking to upgrade with unemployment low and wages growing.
“We often hear about the FOMO during the peak of the market, but the same mindset also occurs when people are trying to buy before the prices start increasing, so you have a lot of people looking to purchase at the moment,” he said.
“We didn’t have the traditional spring market last year with many vendors sitting on their hands as prices soften, so we are anticipating a stronger end-of-the-year with more listings as selling conditions improve. The opportune time to sell is now before the traditional selling season.”
With inflation not falling as fast as the RBA would like, they will be hoping the 12th rate increase in just over a year will have the desired effect. However, rapidly rising house rents are a key driver of persistently high inflation levels.
“With a limited supply of new properties in the construction pipeline and a rising population growth, it is anticipated that rents will continue impacting the housing component of CPI for some time to come,” Mr Tiller said.
Related Reading:
Stamp duty relief for first home buyers is welcome but won’t free up valuable housing stock