With the inevitability that interest rates will likely continue to rise over the coming months and potentially into next year, we are currently hearing some banks and financial commentators predicting up to a 25% drop in NATIONAL home values after 100 basis points of rate rises.
We highlight the generalization of NATIONAL home values as over 66% of Australians live in our 8 capital cities with the median house prices outlined in the table below.
Source: propertyupdate.com.au
The weighting of the 8 capital cities is substantial when considering national home values, as the median value of Sydney, Melbourne, Brisbane, and Canberra are significantly higher than the national median of $748,635.
This presents an excellent window of opportunity in the coming months and into the new year for those who are willing to look past the media headlines of a general ‘property market crash’. We encourage home buyers and investors to explore regional locations where housing is much more affordable.
More homebuyers are becoming increasingly hesitant about buying and some vendors prepared to accept lower prices as they panic about rate rises. This is creating scenarios where we are beginning to see less competition when negotiating purchases and in some instances price drops for properties that have underlying issues or require significant work.
We have focused on the regional City of Ballarat which we have purchased numerous homes and investment properties for our clients and are continuing to do so.
Looking at the total transactions between 1st January – 1st May for 3-5 bedroom houses in the Ballarat region, we can see that most transactions are below $800k with 84.6% in 2021 and 78% in 2022.
This highlights where majority of buyers have been purchasing and we are anticipating that the lower end of the market under $650k is going to become more and more competitive as people decide to lower their budget in fear of interest rate rises and be more conservative.
There has been a slight increase from 2021-2022 in the $800k-$1.25+m range with strong capital growth above 25% in various suburbs and covid impacting the ability to inspect properties in 2021.
We expect to see this trend slow in the coming months where buyers who have capacity to purchase a $800k property may compromise and go for something under $650k. This will increase the demand for the lower price point making it harder for first home buyers to purchase.
The reality is that people are not going to decide that they no longer need a place to live because interest rates are rising. People will adapt and choose to spend less on holidays, eating and drinking out, and being smarter with their money generally to ensure they have a home to live in.
If you are thinking about buying property in 2022 and would like to discuss you options, book a free consultation via our website.
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