Why are house prices surging?

Interest rates remain on hold; house prices surge. What will the RBA and the government do next?

The Reserve Bank of Australia met on Tuesday for its monthly meeting. There were no surprises as they held the official interest rate at its record low of 0.1%.

What has been surprising – as I reported last week – is that house prices have continued to rise during a purported recession. This has led many to speculate on whether the RBA will increase the rate, despite reassuring the population that it had no intention of doing so until late 2023.

In November, the RBA stated that the current rate would remain for at least three years. It still holds the belief that the rate won’t rise until at least late 2023. However, with the current increase in house prices – widely thought to be because of demand – some economists are predicting that the Reserve Bank may decide to increase the rate sooner to curb price growth.

As the COVID-19 pandemic has evolved in Australia, we have gone from fear and dread of what was to come to relative optimism for the future. This has instilled newfound confidence amongst consumers and created an economic recovery that’s surpassed expectations. While interest rates are unlikely to rise before late 2023 according to the RBA, our brighter economic outlook means they are unlikely to fall further either.

Some economists believe that the housing market will have little impact on the RBA’s decision to keep rates as they are until late 2023. Others worry about increased household debt and crippling house prices which the RBA will be obliged to address. While others still, think that APRA will be more effective by tightening lending criteria than the RBA will be by increasing rates.

The very attractive interest rate for borrowers has incited a rush on refinancing and enquiry on borrowing capacity. Investors are beginning to return to the market and first home buyers are making their own impact as they take advantage of the low rates and government assistance.

The demand for property has undoubtedly outstripped supply for some time. But where it has been a shortage of stock and homeowners willing to sell in the past, now the disparity is clearly due to the flood of new buyers into the market. Statistics show that the number of listings remains around the same, or more than the number, from the same time last year in all the capitals.

If you are thinking of selling, now is one of the best times to start the conversation and planning. Our market conditions are unique right now and perfect to take advantage of.

We achieve our strongest results by following a proven strategy, tailor-made to your situation. Take the opportunity to gain from this advantage and my expertise and contact me now.

If, however, you or anyone you know would just like to discuss the current value of your home and the best strategy to get you the best price when you come to sell, you can contact me any time.

Below are a few properties we are currently marketing for sale.

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Published August 24, 2021

By Belinda Cassano