What can we anticipate in terms of the future trajectory of housing prices?

As the global economy continues to evolve, a common concern amongst homeowners and real estate investors is what can we anticipate in terms of the future trajectory of housing prices? As economic indicators fluctuate along with changing policies and technologies, predicting the future path of housing prices has become increasingly more complicated. To gain a better understanding on this topic, it is essential to take into account historical data as well as current market conditions. In this blog post, we will explore different trends that help us project into potential trajectories for home values over the coming years. 

Australia experienced a decline in residential property prices throughout 2022, with soaring interest rates being partially responsible. Studies show that these costing trends could be reversed as early as 2023 – but only if certain conditions are met. 

Last 7 January 2023, CoreLogic’s Daily Home Value Index (HVI) registered an unprecedented decline of -8.40%. Because interest rates are projected to increase soon and diminish the purchasing capacity for borrowers, this market weakness is anticipated to persist in the upcoming months. Nonetheless, as ABC reported from SQM Research’s Housing Boom and Bust Report, capital city house prices could potentially rise between 3-7%, or even up to 9% if everything goes well!

For the property prices to experience a surge, certain conditions must be maintained. The Reserve Bank of Australia (RBA) should keep the cash rate under 4%, inflation ought to decline to 5% and unemployment should stay below 5%. Moreover, if RBA chooses to slash the cash rate in 2023’s second half – that would lead to ideal circumstances for highest growth in property values! Conversely, if any or all those figures rise during 2023- then it could possibly result in stagnant or decreasing house rates.

Why could falling rates mean rising prices?

In 2022, the Reserve Bank of Australia (RBA) raised their cash rate multiple times to combat inflation. Unfortunately, these hikes were passed on to lenders who then increased home loan interests rates; in some instances reducing borrowing budgets by up to $214k. As a result, the maximum amount many Australians could spend on property dramatically decreased and more properties ended up selling for less which ultimately caused house prices across Australia to decline significantly.

If some of the major banks’ predictions about a pause and eventual decrease in interest rates comes to fruition, this might make it simpler for borrowers to manage their payments on bigger mortgages. This could mean more buyers paying higher prices for properties over time if that happens, which can eventually increase average property values in an area. 

What do house prices mean to homeowners?

On the surface, plunging prices may appear beneficial to first home buyers; however, these dipping costs are in part due to rising interest rates which can still make buying a new house difficult. This is especially true in popular areas of Australia’s city centres where homes remain expensive and hard-to-reach for those eager house hunters.

Reduced house values can cause distress for current owners and investors, as their assets may also depreciate in value. This situation could leave them with meager amounts of equity they can access or even put them into a negative equity state with no option to refinance- also known as mortgage prison.

If home loan interest rates happen to drop, it can lead to a surge in property values. Not only will this allow homeowners to benefit from their existing repayments that reduce the mortgage principal faster, but they could also find themselves with more options available for their personal finances – such as refinancing or taking out a home equity loan.

What can you do about house prices and your property?

Everyone’s financial situation and goals are unique, so the best way to react to shifting property values and interest rates depends on you. That said, here are a few pieces of advice that may be worth considering: 

• Unlock your present property worth and acquire a complimentary property report—it’s fast, simple, and completely free.
• Evaluating mortgage refinancing options can be a complex process, but comparing home loan offerings side-by-side is the best way to ensure you get the most value and favourable terms for your current situation.
• Considering investing in an extra mortgage payment or utilising an offset account to create a financial cushion.
• Ensuring your credit standing remains intact is only a few clicks away. Keeping up with your credit score is essential for achieving financial success and protecting yourself against identity theft.
• For personalised advice tailored to you, reach out to a mortgage broker today.

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