With the latest chatter of interest rates declining we thought it worthwhile to analyse what has happened in the past to give you, our revered clients better insight as to values.
Let’s investigate key indicators over the long term, the past 25 years.
Value Trends:
- House prices fell four times.
- They increased by 1% to 10% twelve times.
- They increased by over 10% nine times.
We therefore have a total of 21 increases versus 4 falls, but why?
Cash Rates:
When the Reserve Bank of Australia (RBA) set the cash rate above 3% (15 occasions), house prices –
- Fell twice.
- Increased by 1-10% six times.
- Increased by over 10% seven times.
A total of 13 increases versus 2 falls during higher interest rates.
When the cash rate was below 3% (10 occasions), house prices –
- Fell twice.
- Increased by 1-10% six times.
- Increased by over 10% twice.
Even with lower interest rates, property prices increased eight times compared to two falls.
The Thesis:
There is no clear link between interest rates and property values. Interest rates form one component of the many factors that drive property value. We are of the view that investor sentiment, that is perceptions, confidence, and expectations linked to interest rates plays a significant role and one more pronounced than just interest rate affectation.
In essence, understanding the intricacies of the property market is more than just a game of interest rates. It’s about recognising the patterns and making informed decisions based on historical data. So, next time you hear about interest rates and property values, remember – the relationship might not be as straightforward as it seems.
The Outlook:
The roadmap for 2024 seems peppered with divergence among bank forecasts. While NAB and CBA hover around a 5 per cent mark, ANZ pitches a more conservative 3 to 4 per cent rise nationally, emphasising a faster surge in Sydney.
The crescendo of these divergent forecasts harmonises around one fundamental truth: the market resilience, fuelled by a mismatch between population growth and housing supply. This imbalance remains the bedrock sustaining the upward momentum in property prices especially in high demand suburbs such as Sydney’s Eastern Suburbs.
Thinking of Selling?
Call –
John Wills FAPI CPV JP
Principal
Wills Property
0467 44 38 38
