Rising Property Market Pressures First-Home Buyers in Australia
Mortgage holders were left disheartened by the Reserve Bank of Australia’s (RBA) recent decision to maintain the cash rate, yet there’s a silver lining for prospective buyers. A surge in competition is pushing property prices upwards, largely fuelled by recent interest rate cuts that have instilled greater confidence in the housing market.
Ashleigh Pullin, 28, and her partner James Mashiter, 37, have been on the hunt for their first home since April but have encountered fierce competition, primarily from older buyers with more substantial financial resources. The couple, who secured pre-approval for a $760,000 home loan with a 5% deposit after five years of saving, have placed four offers without success.
“We’ve faced disappointment each time, watching houses sell for $30,000 to $40,000 over our bids,” Pullin expressed. The couple intends to leverage the federal government’s First Home Guarantee Scheme, allowing them to secure a home with a 5% deposit while bypassing lenders’ mortgage insurance. However, the scheme imposes a property price cap of $800,000, restricting their purchasing power in a pouncing market.
Pressured by the potential for future interest rate cuts—which the RBA hinted at should inflation remain stable—the couple feels compelled to act swiftly before prices rise further. Despite the RBA’s current hold on interest rates, there’s chatter around easing in August.
Both Pullin and Mashiter have noticed a marked change in market dynamics over the past few months. “Initially, we were looking at four-bedroom homes priced between $760,000 to $790,000, but now a three-bedroom with two bathrooms consistently exceeds $800,000,” Mashiter noted. With escalating prices, they may need to explore areas further out, such as the Yarra and Dandenong Ranges.
Financial data supports their experiences. Mortgage broker Loan Market recorded a staggering 53% increase in pre-approval requests year-on-year following the RBA’s earlier cuts. According to Jacob Decru, a Melbourne-based broker, buyer sentiment is recovering, leading to a growing fear of missing out among potential homebuyers.
“Owner-occupiers feel the market has stabilised and expect that further cuts will lead to increased prices,” Decru stated. However, available properties are dwindling, with new listings down 11.8% nationwide compared to last year, according to Ray White.
As housing prices continued to rise—recording a 0.6% increase in June, marking five consecutive months of growth—experts predict a gradual easing of interest rates could moderate price surges in the short term. Anne Flaherty, senior economist at REA Group, indicated that holding the cash rate might slow the rapid appreciation observed after earlier cuts.
AMP chief economist Shane Oliver anticipates a more tempered approach to rate reductions in the coming months, projecting further cuts in August, November, February, and May. He noted that while RBA has raised its home price growth forecasts to 5-6%, external risks could alter this outlook.
In response to the competitive landscape, Pullin and Mashiter are intensifying their efforts to appeal to sellers, even resorting to writing personal letters in hopes of winning favour. “We just need to try and get in now,” Pullin remarked, affirming their determination to secure a home despite the adversity.
As the property market continues to evolve, first-home buyers like Pullin and Mashiter illustrate the challenges faced by many in an increasingly competitive environment.
