The impact of increasing interest rates on property prices

Its not logical

Syd med $1.4m
Melb med $1m
Perth med $550k

interest rates go up who will it really hurt

 

Not too interested in what banks say, I am watching my Perth properties rise and rents doing the same

 

And Hobart is around $200k more than Perth! Actually houses in Woodridge are now asking Perth median prices. It's probably the best looking market in Australia for growth going forward.

 

Rising market in Perth started in 2021 and its gaining momentum

2022 is heading for another good year for Perth

 

In Sydney this would be quite transformative. States have been doing Step 1 over the past decade quite well. Step 2 would be huge. New code and some spot rezoning on our own portfolio has added around 50 properties to Sydney supply over a year or two. On mass this could be into the 10's of thousands a year, and will be transformative to inner middle ring housing options that Sydneysiders are crying out for (not having a product choice of only high rise or Greenfield supply 50km away).

 

Annual change in housing prices and the cash rate (1992-2022)
1593-ED1-D-06-BC-49-DF-B8-F9-A03-A77-B221-D3

Housing impacts of tightening cycles (4 cycles: 1994, 1999, 2002, 2009)
587936-D3-859-C-4113-A335-43-D3363-E656-F

Pretty interesting. House prices in Aus only dropped at most 7% all the times that interest rates were raised. Sydney/Melb would have been responsible for most of those corrections, especially in the 17-18' period.

In 2002, we had a hike from 4.25 – 7.25% on the cash rate, and 6 months later houses went up 52.2%, and up 49.8% 12 months after the hike. Obviously that's not going to happen this time, but interesting nonetheless.

Think the point is that, there's more to housing prices going up or down than just the cash rate going up or down.

 

Yep


I think some Dooms Day Darrens are gonna be disappointed

 

Yeah but what is their analysis based on. I dont believe that it benefits them to be wrong. So why so boldly in the 'opposite' direction? Or do they have an agenda?

 

Yeah good point.
Woodridge or say Heathridge? Woodridge is still a depressed area. Heathridge pretty average. Not lovely, but not dodgy.
Either everywhere is going to drop except Perth or Perth will rise. Or both.
There is plenty of work, its not like its a bad economy so its pretty primed.

 

Affordability being a big one. High prices with high rates, thats tough. Remember when rates were 8% etc the value of a median house was much less compared to median income. Was 7 times not 12 times (dont quote me on exact figures).
Thats a key difference. People could afford higher rates back then as mortgages were so much smaller relative to their pay. Median in Brisbane was $360k and Sydney about $600k when rates were at 8%.

 

Well rates are up 0.25%

RBA also stated that normalization of rates is 2.5% which means that we will see rates just under 5%.

Impact is huge for Sydney/Hobart and less so in Brisbane/Melbourne and a blip for Perth/Darwin (because same as paying rents for the time being).

 

We have the second highest household debt in the world. This is largely underpinned by the assumption that property only ever goes up, the fundamentals are very very different in 2022 compared to 2002.

 

I’m waiting to add one more to the portfolio which has to be outside NSW.

 

New listings and auctions this weekend will be interesting

 

I doubt we will see anything noticeable yet.

 

Post election increase in listings I suspect.

 

@Redom now that we have a (marginally) clearer idea of the interest rate side of things today, what do you think the election would do to the market?

I have family members and friends that are holding off listing their properties until after the election - personally i feel that there will be no impact?

 

I don’t know what one is expecting waiting for after the election, unlikely to be better then. And which party wins doesn’t really impact anything meaningful for now to a property transaction.

 

How come interest rate rise won't impact Perth market?

 

Property in Australia, particularly in Sydney and Melbourne, only goes up. You cannot challenge this to most of the people here.