RBA’s Interest Rate Hold: Good or Bad News for the Property Market?
On April 4th, the Reserve Bank of Australia (RBA) announced that they’re keeping interest rates steady for the time being. This decision comes after a string of interest rate hikes starting last May, resulting in a total increase of 3.5 percentage points.
The RBA recognises that monetary policy operates with a lag, meaning the full impact of the previous rate increases hasn’t been fully felt yet. To give more time to assess the situation, the RBA has decided to wait and see how things play out.
Apparently, there are some early signs that consumer spending is slowing down and inflation is lowering, so the RBA wants to evaluate the effects of the previous hikes before taking further action. The current cash rate target sits at 3.6%, the highest level since May 2012, and 3.5 percentage points higher than the pandemic emergency low of 0.1%.
In this article, let’s talk about what this decision could mean for the property market and whether it’s good or bad news for anyone looking to buy or sell a property in Australia.
What Does This Mean for Property Buyers and Sellers?
The RBA’s decision to maintain the cash rate at its April meeting has given a boost to consumer confidence, as seen in the Westpac-Melbourne Institute Index of Consumer Sentiment for Australia for April 2023. This index, which measures consumer sentiment, reached its highest level since June 2022. While the index is still 10.4% below the April 2022 level, consumer confidence increased by 9.4%, with mortgage holders showing a higher increase of 12.2%.
When interest rates are low, borrowing costs tend to be more affordable, which can make it easier to secure a mortgage and buy a property. Conversely, when interest rates are high, borrowing costs can become more expensive and make it harder for buyers to purchase a home.
In this case, a steady interest rate environment can provide some certainty for property buyers; it allows them to plan and budget for future expenses. If you are a buyer, it can also create more favourable conditions, potentially leading to increased activity in the property market.
According to Louis Christopher, the managing director of SQM Research, the pause in interest rate hikes would signal to both buyers and sellers that the housing market may have reached its lowest point. With an inflation drop and a pause in a rate increase, SQM Research’s Housing Boom and Bust Report for 2023 predicted a projected increase of 3%–7% in house prices in capital cities this year.
Under a low-interest-rate environment, this pause can also have its drawbacks. When interest rates are low, the demand for property can increase, which can lead to a rise in property prices. This can make it difficult for first-time buyers to get onto the property ladder, as property prices may be out of reach for some buyers.
On the other hand, this is good news for sellers. With an increase in buyer demand and lower interest rates, buyers may be more willing and able to take on larger mortgages, which could mean that they are willing to pay more for a property. Additionally, as the market becomes more competitive, sellers may have more bargaining power and be able to negotiate higher sale prices.
Will This Affect Property Investors?
For property investors, a stable and low-interest rate environment could be the perfect time to consolidate portfolios, refinance and potentially secure more favourable lending terms. The lower borrowing costs make it easier to access financing, which increases their purchasing power in the property market. This can create opportunities for investors to grow their portfolios and maximise returns.
Find Your Dream Home Today With Hill & Viteri Property
With a rate pause, there is a positive outlook for the property market. If you are a buyer who’s been hesitant to jump into the property market, this pause in interest rates could be just the confidence boost you need. If you are an investor, this is a time to be vigilant and ready to act on opportunities. As the supply of properties is limited, the demand is likely to increase, and property prices may rise. For sellers, this could be good news as it may lead to an increase in buyer demand.
However, it is essential to keep in mind that while rates are likely to remain stable, there is no guarantee that this will be the case in the long term. That is why you must plan ahead and structure your investments in a way that minimises risks associated with any potential rate rises. If you are a seller, it’s always a good idea to work with a knowledgeable real estate agent to understand local market trends and determine the best pricing strategy for your property.
If you are looking for a stress-free real estate experience, we’ve got you covered. At Hill & Viteri Property, our total property service solution covers all the considerations you need to make when it comes to buying or selling property. Our team consists of leading practitioners for both sales and property management. We can take care of everything so you can focus on what really matters.
Contact us today to learn more about how we can help you with your property needs.