What’s Driving Investor Interest In The Property Market?

Published by Otto Dargan on April 11, 2023
The RBA’s decision to hold the cash rate at 3.6% in April, after 10 consecutive rate rises, might renew confidence in the property market. The interest rate pause also suggests that the worst period might be over for the housing market, which may encourage buyers waiting on the sidelines.  CoreLogic research director Tim Lawless shared that certainty around the rate rise cycle would improve consumer sentiment and said, “We know that consumer sentiment and housing market activity have a close relationship, so any upwards movement in spirits could see more buyers and sellers returning to the market, although we would need to see sentiment lift materially before returning to average levels.”

What Are The Reasons Investor Interest May Increase?

1. The Cash Rate May Be Near Its Peak

Borrowers were relieved with the RBA’s decision to hold the rate, but most banks still expect one or more hikes before the rate peaks and finally declines. CommBank, ANZ Bank and Westpac now forecast that the cash rate will peak at 3.85%, while NAB now believes the rate has peaked, at 3.6%.  “We will definitely see more buyers in the market following this news,” SQM Research owner Louis Christopher said. “We’re going to see investors returning to the housing market as they look for a hedge against inflation, and renters looking to escape the tight rental market.”

2. Rental Shortage  

Material shortages and supply-chain issues have delayed many housing projects. The housing supply is low and the NHFIC’s research anticipates a rental crisis over the next five years. The NHFIC also projects that net migration will increase over the next few years, exerting even more pressure on the tight rental market.  The low vacancy rate will probably encourage some people to move from renting to purchasing a home, regardless of the high interest rates. Also, with the high and rising net overseas immigration, there are chances of an increase in the number of permanent or long-term migrants living in Australia, who might decide to purchase, rather than rent, if they can afford a loan and qualify for one.  

3. Rising Rents 

The latest Domain Rent Report revealed that rents for both houses and units had reached record highs in Australia, and vacancies hit a record low. The report also showed that, in the year to March, the median rent for units in Sydney rose 24%, to $620/week, and median house rents hit a record of $660/week. The surge is expected to continue, driven by high demand and low supply. The rental shortage and rising rents present an opportunity for investors that want to earn a good rental income.     

4. Rise In Property Values

Despite the long stretch of rising interest rates, CoreLogic’s data showed a 0.6% increase in home value across Australia over March 2023, after a 10-month streak of falls. The prices of homes in the four biggest cities and many other areas increased, with Sydney experiencing the largest rise, at 1.4%. The regional housing market has also been strong. The combined regional housing index increased by 0.2% over March.  SQM Research’s Christopher has predicted that house prices would rise by 9% this year if rates stayed on hold. Moreover, house prices are set to increase by 8% in Perth, 5% in Melbourne, Brisbane and Adelaide, and between 3% and 7% nationwide.  This property market presents a promising opportunity for long-term investors who want to capitalise on the possibility of property value appreciation. 

5. Better-Than-Expected Consumer Price Index

CPI, a key economic metric, tracks inflation over time based on prices consumers pay for goods and services throughout the country. Inflation is the percentage change in CPI over a certain period of time. It affects your purchasing power, economic policy, government benefits and even your salary at work. The recent decrease in inflation, as measured by CPI, was one of the reasons behind the RBA’s decision to hold the interest rate.   The CPI rose 6.8% in the 12 months to February 2023, but that was down from a 7.4% increase in the 12 months to January, and an 8.4% rise in the 12 months to December 2022. February was the second consecutive month of lower annual inflation, which is also known as disinflation. 

We Are Here To Help

The present situation of the property market presents a good opportunity for buyers and investors. If you have decided to buy a home, then we are here to help. At Home Loan Experts, our experienced mortgage brokers will assess your situation and help you secure a home loan that suits your needs and financial situation. Feel free to call us on 1300 889 743 or fill in our free online assessment form today!