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How have property prices, interest rate cuts, investor hotspots, and first home buyers shaped the property market over the past few months?
The Reserve Bank of Australia’s recent rate cuts have sparked an increase in dwelling values, with the housing market to continue to be positively impacted in the wake of further expected cuts.
According to Cotality’s research director, Tim Lawless, February’s rate cut reversed a recent 0.4 per cent decline in dwelling prices, with May’s rate drop expected to further impact housing values in June and beyond.
“The continued momentum we’re seeing across almost all markets is no doubt being fuelled by rate cuts – both those that have already happened, but also potential cuts in the coming months,” Lawless said.
Cotality’s data showed that only Melbourne and Sydney saw annual declines in dwelling values, recording a drop of -1.2 per cent and - 0.7 per cent, respectively.
While Melbourne has been off investors’ radar since COVID-19, Century 21 Australasia chairman Charles Tarbey has forecast the city to rebound and become a strong performer.
“Interestingly, Melbourne’s quarterly price growth has now outpaced Sydney’s. Investors would be wise to watch the Melbourne market – it could be a strong performer going forward,” Tarbey said.
According to Tarbey, a surge of first home buyers has also been forecast nationwide following the federal government’s First Home Guarantee scheme, which expanded from 1 July.
The program will be updated to enable eligible buyers to purchase or build a new home with a deposit of as little as 5 per cent, without the requirement of a lender’s mortgage insurance (LMI).
While this expansion is expected to prompt increased activity among first home buyers, Tarbey noted they face cost barriers “regardless of grants or guarantees”.
“Prices remain at historic highs in many markets, and if we see another 10 per cent increase this year, those barriers will likely only grow and that may be coupled with more first home buyer competition due to the guarantee,” he said.
Tarbey also projected that underlying market conditions could cause difficulties for first home buyers hoping to get their foot into the market.
He advised first home buyers to consider rentvesting – renting where they want to live, while buying in more affordable areas.
However, he cautioned new entrants to be wary when making their purchases and not just “buy any old property” to enter the market.
“My key advice is to focus not solely on yield, but on achieving a balance between expected capital growth and steady rental income,” he said.
“Capital growth potential is often underestimated but can be the key to turning a good investment into a great one.”
Additionally, Tarbey warned that property prices could rise by 6–10 per cent if supply constraints were not addressed, driving a lot of Australians out of the market’s reach.
"Government regulations and high construction costs are not helping the situation. Australia is an attractive place to live and invest, but we simply aren’t building enough homes.”
Despite Tarbey’s optimism about the forecast property conditions over the next 12 months, he cautioned that global challenges could quickly change the outlook.
He cited the global financial crisis as a key example, which saw property prices dropping 8.5 per cent in just 11 months.
“There are many challenges around the world today that could, at any moment, disrupt the global economy,” he concluded.
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