New Trends Reveal Boost in Australian Property Market Despite Rising Interest Rates

The Australian property market appears to be resisting the chilling effect of increasing interest rates, with reports revealing hotspots of opportunity and promising growth in affordable locales across the country. As reported by Rhys Tarling of The Property Tribune in his recent analysis, certain locations are displaying resilience, showing increased demand and solid prospects for capital growth. Concurrently, Sydney’s property market is gathering momentum, even in the face of Reserve Bank rate hikes, as described by Ryan Smith.

A new Hotspotting report, titled “Top 5 Cheapies with Prospects, City Edition 2023”, pinpoints the growing appeal of affordable areas, which are offering better-than-average rental yields1. As Hotspotting Director Terry Ryder stated, “Over the past 12 to 18 months, when some markets across Australia have been struggling, the ones that have remained buoyant have been those areas where homebuyers and investors can find properties at attainable prices.”

Ryder adds that the key objective is to find areas offering above-average rental yields but also demonstrating good potential for capital growth. He cites Playford in Adelaide, City of Canning in Perth, Salisbury in Adelaide, City of Armadale in Perth, and Inala Precinct in Queensland as examples of these prospective cities.

On the other hand, Sydney’s market surge, driven by tight rental vacancy rates and increased migration, has been augmented by two unexpected factors: the possibility of banks relaxing their lending restrictions and returning Chinese buyers. As Diana Mousina, deputy chief economist at AMP Capital, told The Australian, “The volume of activity among overseas buyers remains low compared to historical standards, but they are clearly becoming a factor in the market.”

In addition, the possibility of a shift in banking regulations may provide a further boost. As Smith reported, banking regulators presently require banks to assess new loans with a 3% buffer, meaning that borrowers seeking a 6% mortgage must prove their ability to repay a 9% mortgage. However, banks like Westpac have begun reducing this buffer to around 2%, offering more flexibility to home loan borrowers.

Despite these changes in the property sector, market experts caution that buyers and investors should remain vigilant and informed, particularly given the current volatility of interest rates. Nevertheless, the resilience of the Australian property market against these challenges underlines its continued appeal to both local and foreign investors.

References:

Australian property market predictions: Top 5 affordable locations with potential, Rhys Tarling https://thepropertytribune.com.au/market-insights/australian-property-market-predictions-top-5-affordable-locations-with-potential/ 

Good news for the property sector?, Ryan Smith https://www.mpamag.com/au/news/general/good-news-for-the-property-sector/447005