RBA Interest Rate Hike and Its Effect on the Property Market Recovery

The Reserve Bank of Australia's (RBA) decision to raise interest rates for the 11th time in its tightening cycle could have an impact on the property market recovery. The move brings the official cash rate to its highest level since April 2012, leading struggling mortgage holders to face higher repayments and reducing the maximum borrowing capacities by around 30%. However, experts suggest that the impact on the property market may be limited, as the supply of homes for sale is still very tight.

  1. The RBA's 11th interest rate hike may cause a slowdown in the property market recovery.
  2. The supply of properties for sale remains low, which may mitigate the impact of the interest rate hike.
  3. Borrowing capacity has decreased by almost 30% since interest rates started rising.
  4. The lag time between interest rate hikes and their effect on the economy is several months.
  5. Property prices remain resilient despite the decrease in borrowing capacity and interest rate hikes.

 

Housing supply remains tight

Despite the interest rate hike, property experts believe that the low volume of properties available for sale will not deter buyers or sellers. They suggest that there are more buyers in the market, and the stable property market could provide confidence to those experiencing hardship.

Impact on buyer confidence

The interest rate hike could affect buyer confidence, according to Real Estate Professionals. The recovery in the housing market has been driven by a surge in immigration at a time when the property supply is constrained, combined with a perception that interest rates were close to the top. However, with three hikes this year, potential buyers may rethink their decisions, waiting to see how far the RBA goes with rates.

Borrowers may feel the pinch in a few months

PropTrack's economist, Anne Flaherty, points out that there is usually a several-month lag between interest rate rises and their effect on the economy. Borrowers are yet to feel the full impact of previous interest rate hikes, and it may take several months for the latest rate rise to be felt.

Property prices remain high, despite reduced capacities

 

Although the average buyer's borrowing capacity has decreased by almost 30%, property prices have fallen significantly less than that. experts suggest that the restricted stock of properties for sale has made the buying environment more competitive, supporting resilience in property prices. However, first-time buyers have been among the hardest hit by interest rate rises, as the combination of price rises and interest rate increases has decreased their borrowing capacity

Where will the market go next?

The property market recovery may experience a slowdown following the RBA's interest rate hike. However, with limited supply and resilient property prices, it may prove to be a minor setback rather than a significant downturn.

Thinking of Selling in This Challenging Market?

Empower Estate Agents can help property owners navigate the current market by offering expert advice on pricing, marketing, and negotiating the sale of their property. With their knowledge and experience, they can assist owners in achieving the best possible outcome, even in a challenging market impacted by interest rate hikes.

Conclusion

While the RBA's latest interest rate hike may impact buyer confidence, the low supply of properties for sale may limit its impact on the property market. However, the lag between interest rate rises and their effects on the economy means that borrowers are yet to feel the full pinch, and it may take several months to determine the long-term impact on the property market.

 

 

CONTENT SOURCE: realestate.com.au

Disclaimers:

Data provided in this article is of a general nature and should not be construed as specific advice or relied upon in lieu of appropriate professional advice.