Are interest rates on the rise?
How are we all feeling? Another cold, Melbourne winter is nearly behind us as we enter spring. Not only has the weather dampened spirits, especially if you are following friends on social media in Europe, but naturally the real estate market seems to be softening as we see consistent interest rate rises.
Although rates have been at record lows for some time, the consensus is the Reserve Bank misled Australians by stating (at the end of 2021) that rates would not increase until early 2024 – only to do a backflip several months later. At the time of writing, the cash rate is at 1.85% with the September meeting expected to see another potential 50 basis point rise.
What does this all mean for the value of your biggest asset? Simply put, we will more than likely see house prices return to the levels they were pre-Covid.
Since mid 2019, prices have increased 35% and historically speaking that growth is unheard of in a 36 month timeframe. To keep increasing at that rate would lead to a false economy that potentially would bear down a long and hard recession.
We got lucky in 2008 and during COVID, but the government of the day and the RBA know that with rising inflation comes changing circumstances and as such, rates had to finally increase after nearly 11 years of a decline or being on hold.
Don’t worry though, the little slice of paradise, the Inner-West is in safe hands. The amazing community of local traders and people stuck together over the last two years. And from a real estate perspective we haven’t felt the full brunt of some other areas in Melbourne. Being so close to the CBD, beach and many fantastic amenities puts the Inner-West in good stead if the market does dip.
Heading into spring we will see more homes come up for sale and it will be a test to see how prices hold going into Christmas. There is a lot of speculation that the market has probably seen the worst of its decline and if anything we are now in a stable market where prices will not drop too much further.
Time will tell and we’ll keep you updated.