Property Market Update - August 2022


The Reserve Bank of Australia (RBA) lifted interest rates by another 50 basis points this month which is the fourth rate hike in as many months. This move has taken the cash rate from an emergency low of 0.1% to 1.85%. Since commencing the tightening cycle in May of 2022, the cash rate has risen by 175 basis points. However, the cash rate remains well below the pre-COVID decade average of 2.56%. The RBA is clearly focused on fighting inflation as its key objective. Any potential drop in property prices and resulting increases in mortgage repayments may help the RBA to contain inflation through wealth effects and limiting household consumption

The Good News (For now)                         

It's likely that the current interest rate hiking cycle may be "short and sharp", with financial markets and many economic forecasters predicting inflation to peak toward the end of this year and interest rate rises peaking around the second half of next year. The ASX cash rate futures has indicated a peak in the cash rate at 3.32% by March next year followed by an easing back to 2.99% by the end of 2023.

Australian Housing Markets Continue To Soften

With the cash rate forecast set to continue its upward trend, economic forecasters are predicting further declines in housing values. Nationally, home values are already falling at the fastest pace since the Global Financial Crisis (GFC), but just how long and steep these falls will be, depends on how fast and how high interest rates move. These falls will also be somewhat tempered by other factors in the broader Australian economy including labour markets, international challenges such as global supply, the continuing war in the Ukraine, plus demographic trends.

Property Prices Snap Shot

• Sydney property prices have dropped -2.2% last month, and are up 0.8% over the last 12 months.

• Melbourne property prices have dropped -1.5% last month and are down -0.2% over the last 12 months.

• Brisbane property prices have dropped -0.9% last month and are up 21.8% over the last 12 months.

Overall, Australian capital dwelling prices decreased -1.4% last month but remain 4.6% higher over the last 12 months.

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