The Reserve Bank of Australia’s decision to increase the official cash rate to 0.85%, for the second consecutive month, is likely to see a normal market emerge bringing some relief for homebuyers, according to real estate network LJ Hooker.
While higher rates will further add to the cost-of-living pressures faced by households, the Official Cash Rate remains low in comparison to the 10-year average of 1.50%. With unemployment levels at their lowest in 48 years, mortgage holders are likely to have the ability to service their loans.
LJ Hooker Group Head of Research, Mathew Tiller said strong housing price growth, over the past two years, has pushed housing affordability down which has also begun to weigh on buyer demand.
"Property prices continue to trend lower in Australia’s two largest property markets, Sydney and Melbourne, while the other capital cities - Adelaide, Brisbane and Perth - have seen buyer demand remain resilient and listings remain very tight pushing prices higher,” Mr Tiller said.
"The good news for buyers is that listings numbers have also begun to rise from very low levels. Across the LJ Hooker network were nine percent higher in the month of May 2022 compared to April 2022.
"The RBA’s decision to act quickly to curb inflation has been expected with both buyers and sellers factoring in the cycle of rate rises into their budget."
Looking forward, Mr Tiller expects the RBA to further increase the cash rate in 2022, in line with central banks around the world, in order to tackle inflationary pressures. And while the economy faces some challenges, the GDP growth is still positive and population growth is strengthening as international borders continue to open up.
Mr Tiller said many mortgage holders had spent the past two years saving and paying down their home loan rather than spending on big ticket items such as overseas holidays.
"The capital growth that people have built up over the two years has been quite substantial and those who have held longer for two years is considerable," he said.
"There were also a lot of people who were able to get ahead on their mortgage and save money – so there is a fair amount of buffer for many people."
