But constant rate increases are having an impact, says peak body head
While Western Australia’s property market can weather the impact of this week’s rate rise, the constant hikes over the past year are impacting parts of the market, according to the head of the Real Estate Institute of Western Australia.
The Reserve Bank hiked rates for the 11th time in a year on Tuesday, bringing the official cash rate to 3.85%.
“The market has proven to be extremely resilient in the face of the previous 10 rises, and we expect it will adjust to this one as well,” REIWA CEO Cath Hart said. “We haven’t seen the significant price drops experienced in east coast markets. In fact, we’re one of only two capital cities to record growth since rates started rising.”
While Hart said Western Australia would be able to withstand the latest hike, she worried that the constant rate rises were having an effect.
“The number of loans to first-home buyers has decreased over the past year as their confidence and borrowing capacity has been eroded,” she said. “reiwa.com data also shows that sales activity in the under-$500,000 price bracket has fallen since rates started rising. This is the part of the market where buyers’ and homeowners’ budgets are likely to be more greatly impacted by the effects of the rate rises and cost-of-living increases.”
Read next: Reserve Bank gives nod to interest rate rise
Hart said the repeated hikes have also affected the rental market.
“Some investors have decided the significant increase in their mortgage repayments has made owning an investment untenable and have sold,” she said. “This reduces the supply of rental properties and increases pressure on rent prices. Also, current market conditions favour investors increasing rents to potentially recoup some of their increasing costs. This isn’t always the case.”
Hart said the full impact of the central bank’s repeated hikes had yet to be felt fully.
“We know there is a lag between when rate rises occur and the effect on inflation. We also know there are numerous households on fixed interest rates that haven’t yet felt the financial impact of the interest rate changes,” she said. “While mortgage holders with variable loans have been adjusting their budgets gradually over the past year, the sudden increase in repayments is likely to be a shock for those coming off relatively lower fixed-rate loans.”
Have something to say about this story? Let us know in the comments below.
