The article delves into the effects of two critical factors that influence the Australian property market: mortgage rate rises and population growth. While mortgage rate rises can affect the property market in the short term, population growth has a more long-lasting impact.
Mortgage rate rises can reduce borrowing power and affect demand, leading to lower property prices. With less demand, vendors may need to lower prices in order to sell homes. For buyers, this could present an opportunity to negotiate a great price. However, the Reserve Bank of Australia (RBA) can’t keep raising the cash rate indefinitely. Economists at each of the big 4 banks have forecast that the RBA will announce just one or two more rate rises by 2 May 2023, with a peak cash rate of 4.10% predicted. Once the RBA stops raising the cash rate, property sale and price volatility may lessen.
On the other hand, population growth has a significant and longer-lasting impact on property prices. The article cites a study by Domain that suggests that national house prices could jump by 8.18% with a population increase of only 1%. The effects of mortgage rate rises, in comparison, are more reactive and occur within the same quarter. The study finds that movement in population and migration numbers is cumulative, and the effects are longer-lasting.
As migration numbers continue to rebound following COVID-19 lockdowns, it’s likely that there will be an increase in property demand, which could cause prices to rise. For example, the article cites Melbourne’s quick population recovery since the COVID-19 lockdowns, which is slated to make it Australia’s most populated city by 2031-2032. Melbourne had an 8.1% property price drop in 2022, while Sydney experienced a heftier reduction of 12.1%. Domain’s study suggests that Melbourne’s population boom and the resulting increase in housing demand are behind the more moderate price drop.
Overall, it’s crucial to consider all factors, including mortgage rates, population growth, and migration, when surveying the property market. Seeking professional advice and getting financially savvy with tips to boost borrowing power can help buyers navigate the market and be ready to pounce when the time is right.
