Rising Competition in Australia’s Housing Market Amidst Anticipated Rate Cuts
As the Reserve Bank of Australia (RBA) prepares to potentially lower interest rates, homebuyers are bracing for intensified competition and rising property prices. Many prospective homeowners are eager to secure their purchases before a surge in demand pushes prices higher.
Sonali Saluja recently secured her first home in Geelong, a three-bedroom, two-bathroom property for $586,000. The 38-year-old senior administrator made her move after analysing the market, hoping to seize the opportunity while prices remained “reasonable.” “I started attending inspections in early March, convinced it was a buyer’s market,” Saluja shared with Yahoo Finance. She also noted that experts speculated on a post-election price boom, coupled with the anticipated reductions in interest rates.
Having migrated from India 17 years ago, Saluja relied on two years of savings to gather her 10% deposit, with assistance from her mother as a wedding gift. Her current mortgage repayments are approximately $3,088 a month, set at a variable interest rate of 5.79%. Despite the high rates in Australia, Saluja feels they’re not unfavourable compared to India’s typical rates of 8-9%. With her bank, Great Southern Bank, previously passing the February rate cut to customers, she plans to allocate any future savings from rate reductions towards expediting her mortgage repayment.
Anne Crarey, Executive General Manager of Property Services at Little Real Estate, reports a noticeable trend of first-home buyers and investors returning to the market in expectation of rate cuts. “This strategy makes sense, as declining interest rates will likely stimulate more purchases,” she remarked. Strong demand could escalate competition and drive property prices up, suggesting that current buyers may benefit from purchasing sooner rather than later.
Research conducted by Cotality indicates that property values could rise by an average of 6.1% for each 1% decrease in the cash rate. Major banks like Commonwealth Bank, Westpac, and ANZ anticipate further cuts, while NAB predicts a significant 0.50% drop in the upcoming week, contributing to a total forecast decline of 1.50% overall.
The recent surge in property values in March reflects improved market sentiment following the previous rate cut, marking a turnaround from previous downturns. However, according to Cotality, the immediate positive impacts of lower rates are starting to diminish.
Crarey also highlighted that while much focus is given to homeowners, renters could benefit too. Increased investor activity may enhance the rental market by providing additional rental stock, thereby stabilising rental prices.
As Saluja prepares to transition from renting to owning, she expresses satisfaction in her decision, adding, “I’m confident about my purchase and encourage first-time buyers to seize opportunities while they can. Waiting too long may hinder your ability to secure a desired property.”
In short, with the RBA’s forecasts and market dynamics, now may be an optimal time for potential buyers to act before prices escalate further.
