The decision of the RBA to keep rates at 3.6 percent in April after ten consecutive rate hikes may boost confidence in the market for property. The slowing of interest rates could also suggest that the worst times could be over for the property market, which might attract buyers who are waiting for a better deal.
CoreLogic Research Director Tim Lawless shared that certainty regarding the rate rise cycle could boost consumer confidence and stated, “We know that consumer sentiment and housing market activity have a close relationship, so any upwards movement in spirits could see more buyers and sellers returning to the market, although we would need to see sentiment lift materially before returning to average levels.”
What Are The Reasons Investor Interest May Increase?
1. The Cash Rate May Be Near Its Peak
The borrowers were pleased at the decision of the RBA to keep the rate steady but the majority of banks anticipate one or two more hikes before the rate rises and then declines. CommBank, ANZ Bank and Westpac are now predicting rates for cash that would peak at 3.85 percent, and NAB is now predicting that the rate is at its peak at 3.6 percent.
“We will definitely see more buyers in the market following this news,” SQM Research owner Louis Christopher said. “We’re going to see investors returning to the housing market as they look for a hedge against inflation, and renters looking to escape the tight rental market.”
2. Rental Shortage
Supply chain issues and material shortages delay many housing developments. The housing market is in decline in the country and NHFIC’s research forecasts an increase in rents over the five years to come. The NHFIC forecasts Net migration to rise in the coming years, putting more pressure on a tight rental market.
The low vacancy rate could make it easier for some people to switch to renting to buying homes regardless of higher interest rates. In addition, due to the increasing and growing net international immigration, there is the possibility of increasing the amount of long-term and permanent immigrants living in Australia that may choose to buy instead of rent if they are able to manage to pay for a mortgage and qualify for one.
3. Rising Rents
The most recent Domain Rent Report revealed that the rents for both homes as well as units reached record levels in Australia and vacancies reached the lowest level in history. The report also revealed that from January up to March, median rent for apartments in Sydney increased by 24% to $620/week. The the median rent for houses set a new record at $660 per week. The rise is expected to continue due to an increase in demand and the lack of supply. The shortage of rental space and the increasing rents are a great opportunity for investors who want to make a profit from return on their rental.
4. Rise In Property Values
Despite the prolonged period of increasing interest rates, CoreLogic’s figures indicated an 0.6 percent increase in the value of homes across Australia in March 2023, following a 10 month period of declines. The cost of housing in the four largest cities as well as other regions have increased by 0.6 percent, with Sydney having the biggest increase with 1.4 percent. The housing market in the region is also booming. The regional housing index was up 0.2 percent over March.
SQM Research’s Christopher believes that home prices would increase by 9percent this year, if rates remain at a low. Furthermore, home prices are expected to rise by 8 percent in Perth and 5percent within Melbourne, Brisbane and Adelaide in between 3 – 7% all over the nation.
This market offers an excellent chance for investors looking to invest long-term who are looking to take advantage of the potential of the appreciation of property values.
5. Better-Than-Expected Consumer Price Index
CPI, an important economic indicator, measures the rate of inflation in relation to the cost consumers pay for products and services in the United States. Inflation refers to the percentage change within CPI over a specific time. It influences the purchasing power of your household, your economic policies, benefits from the government and even your pay at work. The recent decline in inflation, measured by CPI is one of the main reasons for the RBA’s decision to keep the interest rate at a low.
The CPI was up 6.8 percent in the 12 months leading up to February 2023. However, that was lower than an increase of 7.4 percent increase during the 12 months prior to January and an 8.4 percent increase in the 12 months up to December 2022. February was the 2nd consecutive month with lower inflation that is also known as disinflation.
We Are Here To Help
The current situation in the housing market is an excellent opportunity for investors and buyers. If you’ve decided to buy a house and are looking for a mortgage, we’re here to assist. With home Loan Experts, our knowledgeable mortgage advisors will review your needs and assist you to get a loan for your home that is suitable for your needs and financial circumstances.
