Property values surged 8.1 pc in 2023
“If there is a rate cut through the second half of the year, that’s probably going to play out positively for home values. So maybe getting into the marketplace before that could offer buyers a chance to buy well.”
Sydney-based aspiring homebuyer Nick Feltrin is among those looking to get in while demand remains soft and more stock comes into the market.
“I think now is a good time to buy because some buyers are still dealing with the recent interest rate shock and are a bit scared of what’s going to happen with rates so there’s less competition in the market,” he said.
“I’ve been casually looking since mid last year, but there wasn’t much coming on to the market, so I’m hoping that there will be more properties to choose from this year.
“Prices have gone up a lot last year, so I’d like to buy as soon as possible now that I have my pre-approval because I’m worried prices will increase again later in the year if interest rates start falling.”
However, the persistent cost of living pressures, affordability challenges, rising stock levels and low consumer sentiment, have progressively taken some heat out of the market in the past few months.
National home values lifted by 0.4 per cent in December, the smallest monthly gain since the prices started rising in February.
Sydney posted a 0.2 per cent rise, while Melbourne fell by 0.3 per cent, also the weakest growth rates since the beginning of the upswing.
Over the past three months, home values increased by just 0.8 per cent in Sydney, which is a five-fold reduction from the 4.5 per cent quarterly growth notched up in May when monthly growth rates peaked.
Melbourne fell by 0.2 per cent, the weakest showing of all capital cities and a marked downturn from the 1.6 per cent gain in May last year.
Even resilient markets such as Brisbane, Adelaide and Perth have posted slower growth during the same period.
Brisbane home values lifted by 1 per cent over the month, Adelaide was up by 1.3 per cent and Perth rose by 1.5 per cent. In November, values increased by 1.3 per cent, 1.2 per cent and 1.9 per cent respectively.
AMP chief economist Shane Oliver said the potential rate cuts later this year could reinvigorate demand, but prices were still at risk of falling by around 5 per cent during the first half of the year.
“I think prices could fall in the first half of the year led by Sydney and Melbourne as the high interest rates act as a constraint on demand,” he said.
“Through the second half of the year we’re likely to see interest rate cuts, which could occur as early as June.
“I think we’ll see interest rates cut three times, taking the cash rate from 4.35 per cent down to 3.6 per cent which will then help to stimulate the market again later in the year.”
Mr Lawless agreed that lower interest rates could spur on demand but it may not be enough to fuel another strong upswing.
“We still have a housing market that’s highly unaffordable and credit is still tough to get given the recent rate rises and 3 per cent buffer rates,” he said.
“We’re not expecting significant reduction in interest rates, so I don’t think that’s going to be enough to really set the market into a new significant growth phase.
“I think affordability and credit availability will probably keep housing price growth to a fairly soft level. However, the lower rates might be enough to help some of those markets that are trending lower in value to stabilise as households feel like we’re through the worst of this tightening cycle.”