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Menu Menu -------------------------------------------------------------------------------- * Buy * Rent * Sold * Share * New homes * Find agents * Lifestyle * News * Commercial * Buy * Rent * Sold * New Homes * Find Agents * Suburb profiles * Share * News * Lifestyle * Commercial * News * Insights * Guides * Lifestyle * Video 1. News 2. Interest Rate News WILL RISING INTEREST RATES PUT THE BRAKES ON AUSTRALIA'S PROPERTY MARKET RECOVERY? Daniel Butkovich, Property Journalist First published 8 Nov 2023, 2:50pm The latest interest rate hike and the risk of another rise in the coming months could slow Australia’s property market rebound, but won’t be enough to halt further price rises, experts say. Tuesday's decision to increase the cash rate to 4.35% comes as a fresh blow to homeowners who have already seen their mortgage repayments skyrocket over the past 18 months. The November rate rise had been widely expected after higher-than-expected inflation in the September quarter gave the RBA little choice other than to increase interest rates in order to get inflation back to its 2-3% target band within a reasonable timeframe. Recent comments from RBA governor Michele Bullock had signalled the bank has a low tolerance for allowing high inflation to linger and risk becoming entrenched. But even though the latest interest rate rise will further reduce home buyers’ borrowing capacities, economists say the impact will be offset by more powerful factors driving the home price surge across the capitals. HOW THE LATEST RATE RISE COULD AFFECT THE PROPERTY MARKET PropTrack senior economist Eleanor Creagh said record levels of net overseas migration, limited housing stock and a supply pipeline further restricted by the construction slowdown had offset the impacts of interest rate rises, helping push up prices. "This additional increase in interest rates may slow the current pace of home price growth but is unlikely to deter these gains, with strong population growth, tight rental markets and a housing shortfall fuelling further price rises." Video Player is loading. Play Video PlayNext playlist item Mute Current Time 0:00 / Duration 0:00 Loaded: 0% 0:00 Stream Type LIVE Seek to live, currently behind liveLIVE Remaining Time -0:00 1x Playback Rate Chapters * Chapters Descriptions * descriptions off, selected Captions * captions settings, opens captions settings dialog * captions off, selected Quality Levels Audio Track Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Play Mute Current Time 0:00 / Duration 0:00 Loaded: 0% Stream Type LIVE Seek to live, currently playing liveLIVE Remaining Time -0:00 1x Playback Rate Picture-in-PictureFullscreen Record month sees prices hit new peaks across the country 00:51 The latest PropTrack Home Price Index shows home prices are up 4.93% already this year. Prices are tipped to rise a further 5% next year, according to NAB, even though the bank has predicted a further rate hike in February. "We expect the board to form the view that a single 25 basis point adjustment to rates is not enough to mitigate the risks on inflation," said NAB chief economist Alan Oster. There were signs that price growth was slowing, Mr Oster said, including an increase in listing and auction volumes that could soak up demand, meaning prices wouldn’t rise in 2024 as rapidly as this year. "We’re already seeing softness, therefore we’re not expecting the current surge to continue," he said. An increase in listing numbers and auction volumes has already slowed price growth, according to NAB chief economist Alan Oster. Picture: Andrew Parliaros -------------------------------------------------------------------------------- AMP Capital chief economist Shane Oliver said the latest interest rate rise would reduce borrowing capacities by about 2%, and the risk of another hike would keep buyer demand subdued, further slowing price growth. "This will accentuate that slowing in price growth that we have seen and runs the risk that prices will turn negative again," he said. "We’ve seen auction clearance rates slowing down, which suggests that still high interest rates have started to get the upper hand again over the huge supply shortfall we have on the back of booming immigration," he said. "Historically when [clearance rates] fall below 60%, it's associated with falling prices." Get your realEstimate™ Track your property's value and unlock insights and data tailored for property owners. Search an address now However, easing demand wasn’t a bad thing for buyers, Mr Oliver said, considering prices have reached record highs in Sydney, Brisbane, Perth and Adelaide. "Life is always easier for buyers when there’s less demand out there," he said. "When prices are down and nobody wants to buy, and when auction clearance rates are at a low, that's normally a good time for buyers, assuming they’ve got the finance." "For those who still have the finance and can put their hands over their ears and ignore the negative commentary, it does provide opportunities." MORE FROM NEWS Sellers rushing back on signs interest rates have peaked 23 Aug 2023 Where landlords are selling up - and why 18 Aug 2023 WILL THE RBA RAISE INTEREST RATES AGAIN? A slight tweak to the language in the RBA’s statement following its November rate decision made it a little less likely that another rate rise was on the cards, according to Mr Oliver. "The Reserve Bank’s comments are a bit hawkish, but they seem to have relaxed their hiking bias," he said. "They’ve probably finished [raising rates], but I’ve been too optimistic on this for a while now." Mr Oster said there was a chance of another rate rise in December, but a February rate hike was more likely given the board would have the chance to review the next round of quarterly inflation data at that meeting. The big banks are split over whether the RBA will raise rates again. Picture: Getty -------------------------------------------------------------------------------- Westpac chief economist and former RBA assistant governor Luci Ellis said if inflation proved to be more persistent than expected, the RBA would respond. "Over the next few months they’re going to be watching the data very carefully — particularly inflation, unemployment and the world economy, as well as spending here in Australia — for any further surprise that might induce them to act again," she said. "But if things turn out as they expect, they may be content to hold from here." Commonwealth Bank head of Australian economics Gareth Aird said it was doubtful that there would be enough evidence in data released over the next month to justify back-to-back rate increases. "We think the probability of a follow-up 25 basis point rate hike in December is quite low," he said. "February 2024 looks the more likely month if the RBA is going to pull the rate hike trigger again." "Our expectation is that there will be enough signs in the data by early next year for the RBA to conclude that a further increase in the cash rate is not warranted." CBA expects the first rate cut will be delivered in September next year, while NAB believes there won’t be a cut until November. RELATED TAGS Buying Featured Selling RECOMMENDED FOR YOU PropTrack New Homes Report - November 2023 4 min read Riverfront Barwon Heads home on track to become region’s most expensive sale 2 hours ago The Block cult faves quietly sell record-breaking home 1 day ago Yarra Ranges: Award-winning architect John Denton’s unusual pad with its own winery could set new price record 24 hours ago EDITOR’S PICK VIDEOS WE THOUGHT YOU MIGHT LIKE... INTEREST RATE NEWS What the RBA's latest hike means for the property market recovery 3 May 2023 · 4 min read Ninth interest rate hike in 10 months encourages buyers to rush market 12 Feb 2023 The Reserve Bank’s latest interest rate hike could be one of its last 7 Feb 2023 Stark cost of the Reserve Bank’s pre-Christmas interest rate hike 6 Dec 2022 RBA reveals the Aussies most at risk of being unable to meet their mortgage repayments 7 Oct 2022 What the Reserve Bank's unexpected interest rate move means for housing markets 4 Oct 2022 * News * Other Sites ACT Property NewsCelebrity HomesCoronavirus Property NewsNSW Property NewsNT Property NewsProperty Market TrendsQueensland Property NewsSA Property NewsTasmania Property NewsVictoria Property NewsWestern Australia Property News Selling GuideNeighbourhoodsAuction ResultsCommercial NewsThe Block AuctionThe Block NewsHome LoansHome Loan CalculatorsMortgage CalculatorStamp Duty Calculator Disclaimer: The information published in this section is of a general nature only and does not consider your personal objectives, financial situation or particular needs. 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