What Do Rising Interest Rates Mean for the Australian Property Market?

Thinking about starting or expanding a rental property portfolio in Australia? The country’s booming real estate market is expected to slow down slightly due to the rapid rise in interest rates and inflation throughout 2022. Here’s what you need to know about interest rate increases and what they mean for the Australian property market, thanks to the property management software specialists at Managed App.

Fast Interest Rate Hikes in 2022

Several years of COVID profoundly affected the Australian economy, but the housing market was hot, with many buyers taking advantage of competitive prices and low interest rates. As pandemic restrictions lifted and the economy bounced back, interest rates began rising, starting at 0.1% and increasing to 1.85% from January to August 2022.

As reported by Forbes, this has been a swift rise as the RBA tries to combat high inflation. For millions of Aussies who own their own home or investment property, monthly mortgage payments are rising by hundreds of dollars, leading to potential mortgage stress.

Interest Rates Impact on Property Market

ABC News described this period as Australia’s most aggressive interest rate rise since 1994. At the start of September, the Reserve Bank increased interest rates by 0.5 of a percentage point, marking four straight months of increases. The 2.35% cash rate target is the highest since the start of 2015, and further increases are expected in the months ahead, according to RBA Governor Philip Lowe.

These increases carry several implications for the Australian property market, including house prices, the number of people buying vs renting, and mortgage stress. Throughout the pandemic, more first-time home buyers and families took advantage of low interest rates and impressive inventory while rental vacancies grew. Now, the number of people buying is slowing down while house prices fall, and mortgage payments and interest rates increase.

Future Outlook

In the next 12 months, skyrocketing house prices are expected to fall around the country. Reuters reported that home prices rose around one-third during COVID and dropped 1.6% nationwide in July. This was the biggest monthly fall since 1983, bringing yearly price growth back down to 4.7%, a far cry from the peak of 21% at the end of 2021.

Average home prices are projected to fall 6.5% before the end of the year, and a further 9% decrease is anticipated in 2023. Although house prices may tumble, the continuous increases in interest rates will put home ownership out of reach for Australians just making ends meet. Those who have the means to purchase property will benefit from smart investments and professional property management software.

Now that you know more about Australia’s interest rate hikes and the impact on the property market, you may want to take advantage of rental property investment opportunities while you can. Managed App is the leading property management software for owners and agencies, and we can help with your portfolio. Contact our team today to get started.