New research shows Australian couples are delaying home purchases until they know when interest rates will drop.
House prices in Brisbane, Adelaide and Perth have risen by double digits over the past year, despite the Reserve Bank recently raising interest rates at the fastest pace since the late 1980s.
However, new data from CoreLogic points to a slowdown, with Melbourne house prices down 0.2 per cent over the past 28 days, while Hobart prices fell 0.5 per cent.
According to Kaytlin Ezzy, an economist at CoreLogic, this is a sign that aggressive rate hikes are discouraging buyers, many of whom are couples, from purchasing a home until they know what interest rates will do.
‘With high living costs and increased debt servicing costs already straining many households’ budgets, it is likely that some potential buyers are delaying their purchase decision until there is a clearer outlook for interest rates. This has reduced demand and put some pressure on the market,’ she said.
Home buyers now have more choice as homes take longer to sell and fewer buyers expect interest rates to fall in 2024.
“Unsurprisingly, the likelihood of mortgage rates remaining high for longer has dampened interest from some buyers. It is possible that value growth will slow further as affordability issues and gloomy sentiment continue to dampen demand,” Ms Ezzy said.
Figures from CoreLogic showed that the number of new listings since April was well above the five-year average, helping to increase overall inventory, reduce buyer urgency and give buyers more options and 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 prospective homebuyers now expect the RBA cash rate to remain at a 12-year high of 4.35 per cent for some time, with ANZ and NAB now both predicting rate cuts will be delayed until 2025.
“Some economists have pushed back the expected timing of the first rate cut, and consumers are beginning to accept that interest rates could remain high for longer,” she said.
The 30-day interbank futures market sees another rate hike as a one-in-five chance.
This came after new data last month showed inflation had risen by 4 percent in the year to May, ahead of the Reserve Bank’s target of 2 to 3 percent.
More detailed inflation figures for the June quarter will be published on July 31. Financial markets should be concerned if the figures do not show an improvement on the consumer price index of 3.6 percent in the March quarter.
Paula Gadsby, senior economist at EY, said another rate hike was still a possibility if inflation remained high, as the labor market remained tight after 50,200 jobs were created in June.
New data from CoreLogic points to a slowdown, with property values in Melbourne (pictured) falling 0.2 per cent over the past 28 days, while prices in Hobart fell 0.5 per cent.
“If that reading signals an acceleration in underlying price pressures, then a rate hike cannot be ruled out,” she said.
‘We continue to expect the Reserve Bank to maintain the cash rate for some time to come.’
House prices in the capital cities rose 9 percent over the past year to $992,473.
Brisbane, with an average house price of $953,028, is now more expensive than Melbourne, where the median price is $948,879.
But nothing compares to Sydney, where $1.466 million is the midpoint.
Since the RBA began raising rates in May 2022, borrowers in Sydney have typically paid $2,200 more per month on their mortgage, or $26,400 per year.
The RBA’s 13 rate hikes in 2022 and 2023 have led to a 68 per cent increase in variable monthly mortgage payments.