Recent data shows a slowdown in housing value growth in Australia, with some parts of the country even seeing a drop in house values over the last month. The National Home Value Index (HVI), the metric widely used to assess national housing growth, increased by 0.5% over the 4 weeks to July 18. Whilst still indicating growth across the board, this increase is down from a 0.7% increase in the 4 weeks prior and some states (Melbourne -0.2% and Hobart -0.5%) even saw a drop in house values during July, suggesting the market is certainly slowing.
Whilst some of this slowdown can be contributed to the seasonal nature of the property market and winter typically being a quieter period for buying/selling, economists believe we are starting to see the affects of high cost of living pressures on the national housing market. CoreLogic Economist Kaytlin Ezzy attributed the July housing cooling to “persistently low consumer sentiment amid stubbornly high inflation and a rise in advertised stock levels in some markets”. Ezzy also went onto explain how the future outlook of interest rates has started to impact, stating that “throughout the year so far, housing values have been buoyed by low listing levels along with the expectation of rate cuts later this year. However, with the monthly CPI figures for April and May coming in higher than anticipated, the expected timing for the first-rate cut has been pushed back by some economists, and consumers are becoming resigned to the fact that interest rates could remain higher for longer.
“With many household budgets already stretched by the high cost of living and increased debt servicing costs, it’s likely some potential buyers are holding off and delaying purchasing decisions until the outlook for interest rates becomes clearer, which has reduced demand and taken some heat out of the market.”
Up until recent months, it was widely accepted that the next movement in the RBA’s official cash rate would be a downwards one, however recent data shows inflation has remained concerningly high, with some economists now anticipating we may see an increase in the official cash rate even as early as the RBA’s next meeting in August. Whilst another rate rise would certainly slow demand further, a large reduction in housing prices in the short term is not anticipated at this point. “Although rates remaining higher for longer could erode housing demand, its likely values will broadly continue to rise, albeit at a slower pace and with significant diversity from city to city and region to region,” Ezzy said.
With borrowing power and affordability the tightest it has been in years, whether you are looking to purchase or restructure, it is more important than ever to seek the advice of a mortgage broker as opposed to just taking whatever your bank throws up.
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