Interest rates have been a key factor shaping market dynamics this year. Early predictions of rate cuts by June brought optimism, but persistent inflation has delayed these expectations, with economists now pushing rate cut forecasts to 2025 and even suggesting a potential rate hike soon.
“Many economists are now forecasting the cut won’t come until 2025, and there’s even a chance of a cash rate increase in the next few months,” said Thomas.
Impact on Major Markets
This uncertainty has caused major markets like Sydney and Melbourne to stagnate or decline, particularly as winter sets in.
Strength in Mid-Sized Capitals
In contrast, mid-sized capitals like Brisbane, Adelaide, and Perth are performing strongly, with all on track for double-digit annual growth. Perth has already hit this milestone in the first half of the year.
“Brisbane now has a higher median dwelling value than both Melbourne and Canberra, showing the continued strength in that market post the pandemic,” noted Thomas.
Regional Markets Reflect State Capitals
Regional areas generally track their respective state capitals, with exceptions such as regional Tasmania outperforming Hobart and regional Western Australia slightly lagging behind Perth. A lack of new dwelling supply, driven by increased immigration and smaller household sizes, continues to support many residential markets.
Supply Challenges and Policy Solutions
Despite government efforts to boost new housing supply, significant challenges remain.
“New building approvals continue to lag, and an increasing number of projects are becoming unfeasible due to the cost of materials, shortage of skilled labour, increasing developer levies, and the cost and time involved in getting projects approved,” Thomas explained.
Impact on Rental Markets
Property values remain stable or are increasing despite high interest rates and cost-of-living pressures. Rental vacancy rates are at historic lows, leading to strong growth in asking rents across nearly all capital cities.
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