Real estate analysts say they expect New South Wales’ house prices to continue “defying gravity” despite the high cost of debt.
Interest rates ground to a halt at 4.1 per cent today when the Reserve Bank of Australia surprised some by not raising the official cash rate.
It comes after 12 rate rises since May last year.
Real Estate Institute of NSW chief executive Tim McKibbin says while it is a reprieve for mortgage holders, he expects more “rate pain” in the near future.
He said inflation remained high at 5.6 per cent, suggesting further Reserve Bank interest rates in the coming months.
Despite this, Mr McKibbin said he expected house prices to continue to climb.
“The property market is defying gravity. Despite there being increased interest rates we are seeing property prices continue to go up,” he said.
“That’s happened every month over the past four months, and there’s no real indication that’s going to slow.”
The upswing in property values comes after a housing market crash in late 2022, which in turn came off the back of an unprecedented mid-pandemic spike in prices.
Prices climb
CoreLogic data showed a 1.1 per cent rise in national property values over June, which followed a 1.2-per-cent increase in May.
Sydney recorded a 1.7 per cent rise in values in June, while the growth in regional NSW was a much softer 0.3 per cent rise.
Despite recent gains, CoreLogic research director Tim Lawless said the market was still vulnerable to future rate hikes, weaker economic conditions and stretched household balance sheets.
“It’s hard to imagine the recent pace of growth in housing values being sustained while sentiment is close to recessionary lows and the full complement of borrowers are yet to experience the rate hiking cycle in full,” Mr Lawless said.
He said regional NSW had slower growth compared to the cities, as the temporary population shift seen during the pandemic had normalised.
The CoreLogic report found landlord profit margins were rising “well above” the pre-Covid growth rate, with regional NSW’s gross rental yields at 4.1 per cent.
Rental vacancy rates are below half of the pre-pandemic average, hovering at 1.5 per cent in regional Australia and 1.1 per cent in capital cities.
Mr Lawless said he expected rent hikes will eventually taper off as it hit the affordability ceiling.
“Despite such tight vacancy rates it’s likely the trend in rental appreciation will continue to moderate, simply due to rental affordability pressures forcing a change in rental household formation,” Mr Lawless said.
Source : ABCNews