{"id":5221,"date":"2023-03-16T09:10:55","date_gmt":"2023-03-15T23:10:55","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5221"},"modified":"2023-03-16T09:10:55","modified_gmt":"2023-03-15T23:10:55","slug":"got-an-eagle-eye-on-house-prices-rate-rises-are-only-part-of-the-story","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/got-an-eagle-eye-on-house-prices-rate-rises-are-only-part-of-the-story\/","title":{"rendered":"Got an eagle eye on house prices? Rate rises are only part of the story"},"content":{"rendered":"
In a bid to bust inflation, the Reserve Bank of Australia (RBA) has been on a rate rise run that\u2019s seen the official cash rate go from a record-low of 0.10% to 3.60% in just 10 short months.<\/p>\n Along the way, we\u2019ve seen property prices across Australia decline.<\/p>\n As rates rose, Australia saw the largest and swiftest property price drop on record, with a\u00a09.1% fall<\/a>\u00a0from April 2022 through to February 2023.<\/p>\n But a\u00a0recent study by Domain<\/a>, which examined 30 years of data, suggests that population and migration growth have greater and more long-lasting effects on property prices.<\/p>\n The study shows that a 1% mortgage rate increase may result in Australian house prices falling by 1.34%, on average.<\/p>\n But in comparison, national house prices could jump by 8.18% with a population increase of only 1%.<\/p>\n So let\u2019s examine the effects of mortgage rate rises and population growth so you can navigate the market.<\/p>\n When interest rates rise, your borrowing power can dip. And the rise in the cost of living can hit the hip pocket.<\/p>\n So, under these conditions, fewer people may be willing to buy property.<\/p>\n With less demand, vendors may need to lower prices in order to sell homes. And if you\u2019re ready to buy you may be able to negotiate a great price.<\/p>\n But the RBA can\u2019t keep raising the cash rate forever (surely!).<\/p>\n In fact,\u00a0economists at each of the big 4 banks<\/a>\u00a0have forecast that the RBA will announce just one or two more rate rises by 2 May 2023, with a peak cash rate of 4.10% predicted.<\/p>\n Corelogic stated in their recent three-year post-pandemic\u00a0market report<\/a>\u00a0that once we get a rate hike reprieve, property sale and price volatility may lessen.<\/p>\n While mortgage rate rises do affect property prices, other factors appear to have more long-term effects.<\/p>\n Doman\u2019s findings outlined that property prices are reactive to rate rises within the same quarter, whereas movement in population and migration numbers is cumulative and the effects are longer lasting.<\/p>\n So as migration numbers continue to rebound following COVID-19 lockdowns (and lockouts), it\u2019s likely we\u2019ll see an increase in property demand, which could cause prices to rise.<\/p>\n For example, Domain says Melbourne has \u201cmade a quick population recovery\u201d since the COVID-19 lockdowns and is slated to nab the title of\u00a0Australia\u2019s most populated city by 2031-2032<\/a>.<\/p>\n Melbourne had an\u00a08.1% property price drop in 2022<\/a>, while Sydney experienced a heftier reduction of 12.1%.<\/p>\nRate rises can affect the property market, as we\u2019ve all seen of late. But there are other factors that appear to hold longer-term sway over national house prices.<\/strong><\/p>\n
Mortgage rate rise effects<\/h3>\n
Population and migration effects<\/h3>\n