The Reserve Bank’s decision to hold the cash rate steady at 4.35% in March wasn’t surprising.
Many are betting on a downward trend in interest rates soon, though the exact timing remains a mystery, with some commentators now, believing it will be later in the year, initially hoped for.
According to PropTrack’s Senior Economist, Eleanor Creagh, this continued pause in rates reflects a softening in inflation pressures and a period of adjustment for the economy, businesses, and consumers, following the significant interest rate increases initiated in May 2022.
Ms Creagh commented:
“Despite the challenges of higher interest rates, 2023’s housing market proved surprisingly resilient, with this trend extending into 2024.
Market conditions have improved, evidenced by a reacceleration in home price growth after a slowdown towards the end of 2023.”
This positive trend is echoed in the sentiments of buyers and sellers alike
Compared to last year, there’s a palpable optimism in the air.
The year has already seen a flurry of activity, with both home price growth and seller confidence on the rise.
More sellers are now considering it an opportune time to list their properties, resulting in a notable surge in listings and an uplift in sales volumes nationwide.
It seems there’s a direct correlation between rising confidence and improved housing market conditions.
Historically, periods of rising consumer sentiment have consistently led to increased home sales.
Ms Creagh said:
“This stability in interest rates is encouraging more sellers to enter the market, providing buyers with a wider array of choices than they had a year ago.
Data from realestate.com.au’s Residential Audience Pulse Survey highlights this shift: a significant year-on-year jump in new listings in February, with total listings increasing by 7.2%.”
The rise in listings is particularly prominent in capital cities, reaching levels not seen since 2012.
Sydney and Melbourne lead the charge with a remarkable increase in new property listings.
Seller optimism isn’t just boosting listings; it’s also reflected in the auction market.
The beginning of this year saw the highest number of scheduled auctions since 2021.
Despite the increased volume, clearance rates remain strong, indicative of robust housing demand.
But it’s not just about seller confidence.
Buyers, too, are feeling increasingly positive about entering the market.
This is backed by the latest data from realestate.com.au and a notable uptick in the Westpac-Melbourne Institute consumer sentiment index.
Ms Creagh explained:
“While high interest rates and inflation continue to challenge budgets, and concerns about the economic outlook linger, the market’s resilience is evident.
Sales volumes have surged in the first quarter of 2024, particularly in Sydney, which reported the busiest week in terms of sales since November 2021.”
Sales volumes are up
Nationally, sales volumes are up by 24% in the first 12 weeks of 2024 compared to the same period last year, with Sydney and Melbourne leading in increased activity.
Despite the headwinds of higher interest rates, the market is showing signs of improvement, buoyed by stable rates, population growth, tight rental markets, strong labour conditions, and home equity gains.
However, challenges remain, notably the sharp rise in construction costs and shortages in labour and materials, which have slowed the delivery of new builds, exacerbating the supply-demand imbalance.
Outlook
Looking forward, the housing market’s positive momentum and the slowdown in new home completions are likely to counterbalance the challenges of affordability and a slowing economy, said Ms Creagh.
Consequently, we could see further price increases in the coming months, especially with expectations of interest rates dropping in the latter half of 2024.
If the current pace of home price growth persists, we might even see a higher growth rate in 2024 compared to the 6.1% rise in 2023.
The signs are there: a market that’s adapting and evolving, providing opportunities for both buyers and sellers in a landscape that continues to challenge and reward in equal measure.
