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Home Prices: Higher interest rates and lower property ownership may be beneficial for buyers

Rising interest rates and uncertainty are cooling the property market around Australia. Sydney and Melbourne markets lead the declines at 2.7 percent and -0.9 percent, respectively, looking at CoreLogic’s data.

Based on the average property price set by the Australian Bureau of Statistics (ABS) of $1.2 million in Sydney and $966,500 in Melbourne, this reflects discounts each of $32,999 and $8,699 on the average property today.

With inflation at a 21-year high of 6.1 percent and interest rates at 1.85 percent and expected to continue rising, it seems likely that there will be more pressure on property prices in the short term.

But maybe that could be a good thing. Watching the massive property that has been in operation for the past two years, many people have been priced off the market or have felt that the property has gone too far.

With prices dropping, is now a good time to jump in?

Real estate market situation

Over the period 2020-2021, we saw the value of all properties in Australia increase by 23.7 per cent, the strongest growth we have seen since 2003. In contrast to the weak property market we are seeing today, the median home price increased at the same time last year by $107,000 in Sydney and $41,000 in Melbourne in just three months.

In 2022, we saw a decline driven by higher interest rates and uncertainty about how the Australian economy will weather the current inflation crisis. The Reserve Bank of Australia (RBA) initially forecast a 15 per cent decline in the property market by the end of 2023, with further declines expected in 2024.

It should be noted that not all regions were affected (or likely to be affected) by this downturn equally. We are seeing higher property prices in areas with strong demand and limited supply, and prices weaker in areas that don’t have the same fundamentals. This trend is likely to continue throughout this period of property market turmoil.

The main driver of rising property prices is rising interest rates, which have increased by 1.75 per cent over the past four months adding thousands to the cost of repayment on the average Australian mortgage. With interest rates expected to continue to rise until 2022 as the Reserve Bank of Australia grapples with the current global inflation crisis, more pressure will be placed on borrowers and the property market as a result.

Advantages of buying real estate now

With the real estate market downturn and fewer buyers in the market, people who are buying real estate today are doing so at a huge discount to the prices we’ve seen recently.

There is a lot of fear and uncertainty. In my experience helping people with their investment through bull and bear markets, I’ve found that this uncertainty creates opportunities.

During the height of the Covid crisis, there was also a lot of talk about the potential for major declines in the real estate market, and many people were very afraid to buy property. Lots of people were sitting on the sidelines waiting for the uncertainty to pass, convinced there would be a massive crash that would allow them to gain more deals.

But before we knew it, the “crisis” was over and the uncertainty was gone. The real estate market did not fall as much as expected, and many people lost the boat.

In my view, the current conditions are ideal for property buyers to get a bargain.

Disadvantages of buying real estate now

However, buying real estate today involves risks. The main factor that any property buyer needs to manage in the short term is the potential for interest rates to rise further.

Higher interest rates for real estate buyers today mean that you will likely pay more for your mortgage in six months than you are paying today. As mentioned above, rates tend to be around 2 percent higher than their current levels in the short term – which means you need to be prepared and ready to finance your higher mortgage payments.

There is also the potential for property values ​​to fall further in the short term. Buying and then selling real estate is an expensive process, so you never want to have to sell a property. But when values ​​decline, it is important to protect yourself.

What is the best time to buy a property

Looking back, it’s easy to spot “good” times to buy real estate, but no one has a crystal ball. We never know where the real estate market is headed until it actually happens.

Furthermore, while there have been times we can see that it has been better than others to buy real estate, values ​​have consistently gone up over the long term. This means that over any 10-year period, the value of your assets will increase.

This indicates that the best time to buy was always 10 years ago. The second best time is today.

My point is that if property is on your money roadmap, now is the time to buy. You will be able to take advantage of the uncertainty, pick an asset that was a good investment six months ago at a higher price, and move forward on your financial journey.

Finding a good quality property is critical, and having a solid plan is absolutely essential to protect risks. But if you understand these two things correctly, you will be ready for success, and you will put yourself in a position to come out of this period of turmoil in a stronger position than you went.


Buying real estate is scary at the best of times, but when the fear and uncertainty are high it is even more difficult. But real estate has been one of the most effective ways of investing to build wealth over the past 100 years or so in Australia, and I don’t see that going to change any time soon.

Take the time to get your approach right, and then make it happen – your future self will thank you for it.

Ben Nash is an expert financial commentator, podcast broadcaster, financial advisor, founder of Pivot Wealth, and author of the Amazon bestseller Get Unstuck: Your Guide to Creating a Life Unlimited with Money.

Ben just launched a series of free online financial education events to help you get a financial introduction. You can check all the details and book your place here.

Disclaimer: The information in this article is general in nature and does not take into account your personal goals, financial situation, or needs. Therefore, you should consider whether the information is appropriate for your circumstances before acting on it and, where appropriate, seek professional advice from a financial professional.

Originally Posted With High Interest Rates Could Be a Boon for First-Time Homebuyers

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