PROPERTY PORTFOLIO
INTERESTING TIMES A return of balance with rising interest rates.
WORDS NICK NICHOLS THE PROSPECT of higher interest rates has thrown what some see as a welcome spanner in the works for the property market, but it raises the question of what to expect next. There’s a lot of speculation about how far the Reserve Bank of Australia will pull the interest rate lever to put the brakes on inflation, but the consensus is that the market already should have been braced for the retreat from the record low cash rate that has facilitated the latest property boom. With a diversity of perspectives being offered by analysts, the dominant theme is that the Australian market is facing a reset with the ‘normalisation’ of the cash rate expected to occur at the fastest pace in some decades. The heat is already coming out of the Sydney and Melbourne markets. CoreLogic data shows they were the first capital city markets to record negative monthly growth rates this year with quarterly falls of 0.3 per cent and 0.5 per cent respectively in median home values.
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– Issue 91
But by the end of April, annual house price growth still stood at 17.1 per cent in Sydney and 10.1 per cent in Melbourne. However, Brisbane, a perpetual property underperformer for many years, is now the strongest capital city market with a quarterly increase of 5.9 per cent, followed by Adelaide at 5.6 per cent. Annually, these two cities have experienced house price growth of 32 per cent and 28.4 per cent respectively. The data naturally varies from suburb to suburb and CoreLogic research director Tim Lawless notes that the suburbs with the biggest falls in median prices were those at the ‘upper quartile of the market’ rather than the middle to lower end. CoreLogic also points out that the Melbourne and Sydney markets are prone to a high level of volatility in some of the more expensive residential enclaves. “These softer conditions come after a stronger performance across the premium end of the market through the growth phase,” says Mr Lawless.
“Historically, more expensive housing markets tend to lead the upswing, but also lead the downturn, which is what we seem to be seeing at the moment.” Yet Lawless also notes that Brisbane suburbs in this upper quartile remain the exception with the city broadly in upswing. Cameron Kusher, the economic research director for REA Group, offers a pragmatic perspective on the impact of what we should expect from interest rate increases, and it comes down to getting accustomed to pre-pandemic conditions. “(Higher interest rates are) likely to mean properties are going to take longer to sell because there’s likely to be fewer potential buyers,” says Mr Kusher. “We don’t know what’s going to happen with sellers, but we’re going to see that better equilibrium between demand and supply in the market which will mean there’s not as much urgency to buy properties as what we’ve seen over the past few years.”
