Angus Raine, Raine & Horne executive chairman, said the potential impact of the Reserve Bank’s decision was concerning for homeowners struggling to manage rising mortgage and energy expenses.

He said the RBA has indicated there could be a need for further actions to tighten monetary policy in order to achieve its inflation target of 2-3% within a reasonable timeframe.

“It is desirable for the RBA to permit the recent rate hikes to filter through the economy, particularly as more homeowners’ transition from fixed rates in the upcoming months,” he said.

“Halting the increase in interest rates next month, coinciding with the start of the 2023/24 financial year, would provide relief to small businesses that are struggling with mounting financial burdens, including rising expenses for fuel and equipment.”

With the unemployment rate expected to continue to lift in the coming months, PropTrack senior economist Eleanor Creagh said it could once again mean buyers become more cautious as their sense of job security waned.

“The current pace of price growth would also wane if stronger market conditions improve seller confidence and spark a boost in stock coming to market in spring,” she said.

“Though, by that point interest rates could have stabilised easing buyer concerns. Interest rates are already closer to their peak than not, and the shock of rate rises has lessened.

“With the bulk of interest rate tightening in the rear-view mirror, much of the uncertainty buyers have experienced with respect to borrowing capacities and mortgage servicing costs is subsiding, meaning a better sense of how far their budgets may go.”

ANZ has predicted a cash rate peak of 4.35%, and its head of Australian economics Adam Boyton said risks were likely skewed toward the RBA needing to move more than just once more.

“Given our own views about the outlook for productivity, unit labour costs and the stickiness of services inflation we continue to expect another 25bp increase from the RBA, most likely in August,” he said.

Commonwealth Bank head of Australian economics Gareth Aird said mortgage repayments will rise to a record high as a share of household income, as the big number of ultra-low fixed rate loans continue to roll-off over the year.

“There is a clear risk that the RBA board delivers another rate hike over coming months.”

Meanwhile, Real Estate Institute of Australia president Hayden Groves said mortgage holders were facing the worst housing affordability since September 2008, with the proportion of income needed to meet average loan repayments across Australia increasing to 44.9 %.

“To put this in perspective, nationally the average loan repayment increased to $4537 over the March quarter, which is a whopping increase of 35% over the past 12 months,” he said.

Housing market strengthens despite rate rises

Nationally, would-be buyers have been out in force despite the rate hikes, with PropTrack data revealing there was a 7% increase in potential buyers per listing in May 2023 compared to May 2022.

Furthermore, potential buyers per listing in the combined capital cities were up 15.3% year-on-year, while regional buyer numbers fell 4.8%.

PropTrack’s latest Home Price Index for May showed the national rise in prices already seen so far this year gathered pace in May, broadening and accelerating across markets.

According to the figures, national home prices rose for a fifth consecutive month in May, increasing 0.33%, bringing prices up 1.55% from the low point recorded in December last year.

Ms Creagh said the housing market has so far avoided the steep falls many expected.

“The decision by the Reserve Bank to lift the cash rate in May did not deter the current home price rebound, in fact it was the opposite, with price rises broadening across markets and remaining resilient to the falls the calculated shift in borrowing capacities would imply,” she said.

“Housing demand is stronger, likely bolstered by the surge in net overseas migration, as well as very tight rental markets.

“Given limited new stock is coming to market, buyer interest is being concentrated, which is underpinning home prices and offsetting the downward pressure from interest rate rises.”

The latest rate hike was unlikely to impact property prices with a shortage of listings and high demand driving growth, according to LJ Hooker Group head of research Mathew Tiller.

“It shouldn’t lead to a flood of mortgagee repossessions hitting the market, but it is likely there will be homeowners looking to downsize their mortgage as a way of managing their household budget, so we are expecting listings to slowly rise,” he said.

“Property markets are more positive for homeowners who do decide to list with elevated auction clearance rates, rising prices and higher attendances at open homes all pointing to a stronger winter selling season. “

Mr Tiller believed property prices have also benefited from buyers trying to pick the bottom of the market.

“We often hear about the FOMO during the peak of the market, but the same mindset also occurs when people are trying to buy before the prices start increasing, so you have a lot of people looking to purchase at the moment,” he said.

“We didn’t have the traditional spring market last year with many vendors sitting on their hands as prices soften, so we are anticipating a stronger end-of-the-year with more listings as selling conditions improve.

“The opportune time to sell is now before the traditional selling season.”

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