Australian couples are now delaying home purchases until they know when interest rates will fall, a new study shows.
House prices in Brisbane, Adelaide and Perth have been growing by double digits over the past year, despite the Reserve Bank recently raising interest rates at the most aggressive pace since the late 1980s.
But new data from CoreLogic points to a slowdown: Melbourne property values fell 0.2 per cent over the past 28 days, while Hobart prices fell 0.5 per cent.
Kaytlin Ezzy, an economist at CoreLogic, said this was a sign that aggressive rate hikes were discouraging buyers, including many couples, from purchasing a home until they knew what interest rates would do.
“With many household budgets already strained by the high cost of living and rising debt servicing costs, some potential buyers are likely to be postponing their purchasing decisions until the interest rate outlook becomes clearer, which has dampened demand and eased the market somewhat,” he said.
For now, homebuyers have more options as homes take longer to sell and fewer buyers expect a rate cut in 2024.
“Unsurprisingly, the potential for mortgage rates to remain high for longer has dampened some buyers’ appetite, and we could see value growth slow further as affordability challenges and low sentiment continue to weigh on demand,” Ms Ezzy said.
CoreLogic figures showed the level of new properties for sale since April had been well above the five-year average, “allowing overall stock levels to build up, reducing buyer urgency and giving them more choice and more leverage at the negotiating table.”
Australian couples are now delaying home purchases until they know when interest rates will fall, new research shows
Ms Ezzy said potential homebuyers now expected the RBA’s cash rate to remain at a 12-year high of 4.35 per cent for some time, with ANZ and NAB now forecasting a delay in rate cuts until 2025.
“Some economists have pushed back the expected timing of the first rate cut, and consumers are resigning themselves to the fact that interest rates could remain high for longer,” he said.
The 30-day interbank futures market sees another rate hike as having a one in five chance.
This came after new data last month showed inflation had risen 4 percent in the year to May, a level higher than the Reserve Bank’s 2 to 3 percent target.
More comprehensive data on June quarter inflation is expected to be released on July 31 and financial markets could be shaken if the data fails to show an improvement from the March quarter’s 3.6 percent consumer price index.
Paula Gadsby, senior economist at EY, said another rate hike was still a possibility if inflation remained high, with the labor market still tight after the creation of 50,200 jobs in June.
New data from CoreLogic points to a slowdown: property values in Melbourne (pictured) fell 0.2 per cent over the past 28 days, while prices in Hobart fell 0.5 per cent.
“If that reading indicates an acceleration in underlying price pressures, a rate hike is not out of the question,” he said.
‘Our core expectation remains that the Reserve Bank will hold the cash rate for some time to come.’
House prices in the capital rose 9 percent over the past year to $992,473.
Brisbane, with a median house price of $953,028, is now more expensive than Melbourne, where the median price is $948,879.
But nothing beats Sydney, where $1.466 billion is the median.
Since the RBA began raising rates in May 2022, Sydney borrowers have typically been paying $2,200 more a month on their home loan, or $26,400 a year.
The RBA’s 13 rate hikes in 2022 and 2023 have led to a 68 per cent increase in variable monthly mortgage payments.