Thinking of Holding Off Buying Until Interest Rates Drop? Here’s Why You Might Want to Act Sooner
With many Australians hoping for interest rates to fall, it may seem tempting to delay your home purchase. But before you decide to hold off, consider what might happen to home prices when rates do eventually drop. If you’re home loan ready, buying sooner rather than later could work in your favor.
The Reserve Bank of Australia (RBA) held the official cash rate steady in September, and there’s growing consensus that rate cuts could be on the horizon. Major banks like Westpac and NAB expect rates to decrease in the first half of next year, while Commonwealth Bank is forecasting a possible rate cut as early as Christmas.
While a rate reduction would be welcome news for many, there’s another factor to consider—how property values might react to falling rates.
How Could Home Values Respond to Interest Rate Cuts?
It’s worth noting that despite rising interest rates since mid-2022, property values have actually increased. The national median home value rose from $752,507 in June 2022 to $807,110 today.
With this trend in mind, many experts believe that if interest rates fall, home values could rise even further. But how much higher could they go?
Ray White Economics has crunched the numbers, and they suggest that following a rate cut, property prices could rise by 0.6% within just one month. According to REA Group, this would translate to an additional $5,000 on the average home price across Australia after just one rate cut.
And that’s just the beginning.
Louis Christopher of SQM Research predicts that if there are four rate cuts next year, it could lead to a significant rebound in property markets, particularly in cities like Sydney and Melbourne, where markets have recently been softer.
What Could Happen to Home Prices in Your Capital City?
While the impact of rate cuts on property values will vary by location, here’s what Ray White Economics and REA Group suggest could happen in capital cities in the first month after one official rate cut:
– Sydney: Values could rise 1.4%, adding an extra $15,300 to the median home value.
– Melbourne: A 1.0% rise could see prices increase by $8,000.
– Brisbane: Home prices could climb by 0.4%, adding $3,400.
– Canberra: A 0.5% rise could push prices up by just over $4,000.
– Adelaide: Prices might rise 0.3%, adding $2,300 to property values.
– Perth and Darwin: No change to values is expected initially.
These figures are based on past responses to rate cuts and could vary depending on future market conditions. For example, Perth currently boasts one of the country’s strongest property markets**, and further rate cuts could fuel even higher price growth there.
Should You Buy Now or Wait?
While waiting for interest rates to drop may seem logical, it could also backfire. Falling rates often lead to increased property prices, meaning that the home loan you qualify for now may not stretch as far in a rising market.
The truth is, the “right” time to buy a home is when you’re financially ready. And with today’s spring market, there’s an added advantage for buyers—there’s more stock available. According to CoreLogic, newly advertised housing hasn’t been this plentiful at this time of year since 2021, giving buyers more choice.
If you’re looking to purchase your first home or your next property, it could make sense to act now while interest rates are still steady, and you could benefit from potential rate cuts in the near future.
At Clark Finance Group, we can help you assess your borrowing power and find the best home loan for your needs. Whether you’re buying or refinancing, we’re here to support you every step of the way. You can book an obligation free appointment CLICK HERE
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If you’re considering buying a home or investing in property, contact us today. We’ll help you understand the current market, explore your options, and find the right loan to suit your needs.
*Disclaimer: The content of this article is general in nature and is presented for informative purposes. It does not constitute tax or financial advice. Consider your personal circumstances and seek professional advice before taking any action. This content is protected by copyright laws and other intellectual property laws and may not be modified, reproduced, or republished without prior written consent.*
