Interest Rates & Aussie Property: A Tense Balancing Game

Australian Property Market Soars to New Heights

Published: 8th December 2023

G'day mates! Rasti Vaibhav here, your dedicated Architect of Property Wealth.

In this week's update, we're taking an exhilarating dive into the latest developments in Australia's property market, as of the week ending 08 December '23. From record-breaking highs to nuanced market shifts, I've got the essential insights you need to stay ahead.

Whether you're a seasoned investor or just getting your feet wet in the world of real estate, this update is tailored to give you a clear view of the evolving property landscape down under.

So, let’s unpack the latest trends and see what they mean for you!

Breaking Records: Australian Property Prices Reach New Milestone

In an unprecedented move, Australian property prices soared to a national record high in November. CoreLogic's Home Value Index (HVI) witnessed a modest yet significant rise of 0.6%, the smallest monthly increase since February, but nonetheless, a record-breaking one. Since January 2023, we've observed an impressive surge in housing values by 8.3%.

However, it's not all uniform growth across the board. Darwin, Melbourne, and Hobart experienced slight dips in values. Tim Lawless, CoreLogic’s research director, attributes this to an imbalance between supply and demand, which continues to exert strong upward pressure on housing values in most markets. Factors like rising advertised stock levels, deteriorating affordability, and low consumer sentiment have impacted the three cities experiencing a decline in property values.

Graph illustrating Australian property market price increase in 2023

Future Predictions: Will Property Prices Keep Rising?

Looking ahead, there's a burning question on everyone's minds: Will these property prices continue to climb in 2024?

The resilience of the market is something to marvel at. Despite facing 13 cash rate increases and a cost-of-living crisis, the property prices continued their upward trend in 2023.

Experts, including Dr. Nicola Powell, Domain’s Chief of Research and Economics, are forecasting a potential lift in house prices across the combined capital cities by another 6% to 8% in 2024. Sydney, in particular, is expected to see a growth of 7% to 9%. Post-COVID migration and population growth are anticipated to maintain upward price pressures on the property market.

Map showing popular regions for first home buyers in Australia.

Interest Rates: A Delicate Balancing Act

The topic of interest rates is a complex one.

Philip Lowe, the former Governor of the Reserve Bank of Australia, expressed concerns over whether the current rates are sufficient to control inflation. His worry stems from the global economic landscape, where governments, including Australia's, have been providing cost-of-living assistance to taxpayers. This, Lowe argues, could inadvertently contribute to inflation.

First Home Buyers: Where Are They Heading?

Let's turn our focus to first home buyers.

New data reveals some interesting trends. In New South Wales, areas like Liverpool's 2170 postcode have become hotspots. Melbourne's outer north and regional Queensland's Mackay are also seeing significant activity.

PropTrack's senior economist, Angus Moore, notes that first-home buyers are increasingly looking at outer suburban, more affordable areas due to financing constraints.

Construction site representing low building approvals in Australian property market

The State of Building Approvals

Another critical aspect to consider is building approvals. Although there was a slight increase in October, the overall figures are still too low, as pointed out by Tom Devitt, HIA Senior Economist. He predicts that the building pipeline is shrinking, and in 2024, we might see the lowest number of new house constructions in over a decade.

This trend is likely to influence the broader property landscape significantly.

Australian cityscape depicting the booming real estate market in 2023

Signing off, I'm Rasti Vaibhav, your guide and ally in navigating the complex world of property investment.

Remember, understanding the market's nuances is key to making informed decisions. If you're looking to delve deeper into how property investing can work for you or just want to have a chat about your personal circumstances, book a time with me.

Alternatively, join our educational workshops to expand your knowledge.

Let's embark on this journey to property success together!