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The first Interest Rate rises in Australia in over 11 years has caused quit a stir in the media  about what the impact will be on the property market.

The Australian Financial Review reported

” The Reserve Bank’s earlier and sharper-than-expected interest rate rise of 0.25 percentage points could put a squeeze on recent home owners, spook new buyers and trigger a sharper fall in prices this year”

While the ABC reported;

“Higher interest rates and mortgage repayments will be ‘the new normal’ for home owners in 2022”

and said;

“Interest rate hikes could slash house prices by 15 per cent”

So there is a lot of fear and gloom being painted.  It makes sense that the property market will slow down a little and we have been seeing that as speculation about an interest rate rise increased.

The initial impact will be felt by borrowers, especially those younger people that have larger mortgages.  While a single increase would be manageable for most people across Brisbane, further rises would put pressure on household finances.

“The median value of a house in Brisbane is about $771,000, so the typical loan size if someone’s got a 20 per cent deposit, would be nearly $617,000.

“This latest 25 basis-point rate hike means the typical mortgage for a new borrower would be about $81 higher per month.

“But of course, as we see rates rise more – say for example if we see interest rates go up by 100 basis points — then that’s adding $332 per month to the typical mortgage which is becoming more material.”interest rate rises in brisbane

Large interest rate rises will likely take the first home buyers out of the market for a while or push them towards less costly units or townhouses.  Interestingly we have seen an uptick in Investor buyers in recent times as they know that there may be a little less competition in the market.

What Causes Inflation?

The main reason that interest rates have increase has been inflation.  We are seeing inflation running at the highest level in over 20 years forcing the RBA to act.  Historically wars have caused inflation to spike and we are seeing that at the moment as well.  Petrol prices have also seen a massive increase and this is another major driver of these higher levels of inflation.

So a speedy end to the conflict in Europe may help to mitigate the inflationary issues, but on the other hand a drawn out conflict would extend the problems.

Higher Wages.

Usually when we see higher inflation we also see demand for wage rises.  This hasn’t started to any great extent just yet but we can expect to see this occur as well.  A higher wage can mitigate the impact of higher interest rates.  Again it may be the investor buyers that will benefit from these higher wages more than the first home buyers.

Where to Moving Forward?

During the COVID-19 pandemic we saw people moving to regional areas and an influx of home owners from southern states to south-east Queensland.

Which lead to the Queensland’s housing market being described as “nation leading”, with values surging in the last year.

“We’re seeing, for example, Brisbane housing values are rising at nearly 6 per cent, quarter-on-quarter, and across regional Queensland, it’s about the same rate – it’s about 5.8 per cent quarter-on-quarter.

“What that means is somebody in Brisbane has added about $175,000 to the median value of their home just over the past 12 months.”

The rapid interstate migration was the main driver behind the strong demand for housing, especially in south-east Queensland.

However the combination of higher interest rates and elevated house prices would exacerbate affordability issues and naturally slow the state’s housing market.

So the market is changing so it is even more important to talk with the Everton Park and McDowall property experts at Hicks Real Estate to get the latest advice.

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Hicks Real Estate is a Brisbane based, full-service real estate agency supporting buyers and sell as well as renters and property investors. With almost 20 years experience in the local market, we are the real estate experts you can rely upon.