Analysts Predict Cooling in House Price Growth Amid Interest Rate Uncertainties
By Jeff Gibbs
As the Reserve Bank of Australia (RBA) keeps interest rates steady, experts are forecasting a slowdown in house price growth during the upcoming winter months, influenced by ongoing uncertainties about potential rate hikes. Despite this, a prevailing fear of missing out (FOMO) may drive buyers who have been sidelined, eagerly awaiting rate cuts.
Current Rate Status and Economic Indications
The RBA’s recent decision to maintain the cash rate at 4.35% comes with a cautious note from RBA Governor Michele Bullock, suggesting further hikes could occur if inflation remains unchecked. This announcement aligns with data from the March quarter showing stronger-than-expected inflation, leading financial markets to adjust their expectations for a rate cut to no earlier than mid-2025.
Impact on Property Market Dynamics
Eleanor Creagh, a senior economist at PropTrack, noted that the market had previously benefited from a pause in rate hikes since November, resulting in robust price increases. However, she anticipates a moderation in this trend: “As we enter the typically quieter winter period and with rate cut expectations pushed to possibly early 2025, we expect to see a slight deceleration in price growth.”
Ben Burston, Chief Economist at Knight Frank, echoed this sentiment, highlighting that the potential for a rate cut this year has significantly diminished following the RBA’s recent statements. He pointed out that while buyer caution regarding interest rates persists, the stronger drivers of market activity—such as rental price increases, limited housing supply, and population growth—continue to exert significant influence.
Seller and Buyer Activity in a ‘Normal’ Market Environment
With disruptions like school holidays and public holidays now past, the real estate market is entering a period that will better reflect standard conditions. Upcoming auctions are set to increase notably, with over 2,548 homes scheduled this week—a 43% rise from the same period last year.
Anne Flaherty from PropTrack observed that unlike typical post-Easter trends, the market has seen a sustained high volume of listings. “Clearance rates are holding up well, averaging around 60% in recent weeks, which indicates continued strong buyer engagement,” she added.
Regional Variations and Market Segmentation
Cate Bakos, a Melbourne-based buyers’ advocate, described the current market as exhibiting a ‘two-speed’ dynamic, where well-presented properties attract significant competition, whereas less desirable listings are slower to sell. She also noted improvements in the availability of building materials and labour, which could influence market activity.
While Victoria and New South Wales report higher listing volumes, markets in South Australia and Western Australia have experienced limited supply, contributing to continued price increases in Perth and Adelaide.
Future Expectations and Strategic Buying
Rich Harvey, a buyer’s agent, noted a prevailing hesitancy among buyers concerned about current interest rates, with many awaiting clearer signs of potential rate reductions. “Once rate cuts become more likely, we anticipate a resurgence in market demand,” Harvey stated.
Bakos predicts that the RBA’s decision to hold the rate will bolster buyer confidence, potentially prompting many to enter the market before any actual rate cuts, recalling the rapid price increases seen in 2021. “As soon as there’s talk of a rate drop or an actual rate drop, we’re anticipating that buyers will flood in—and they don’t want to get swept up in that,” she explained.
In summary, while the Australian housing market may face a period of slower growth due to the interest rate environment, underlying factors such as low supply and high demand continue to support active market conditions.
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