Australia has seen many changes in the past month. A new Labour government was voted into power on 21 May 2022, and the RBA raised the cash rate to its highest level in decades with an increase of 50 basis points to 0.85%.
In this update, I look at Labour’s five-point housing and economic plan and what it means for homeowners. Lastly, I explore Perth’s property market predictions for the coming months with an emphasis on rising cash rates likely to continue well into 2023.
Watch the Perth Market update in 58 seconds including why this winter could be the ideal time to sell and the really easy way that Buyers can get ahead in this market.
For a more detailed market update, please see below.
Share market in decline
The recent rise in inflation has seen the RBA hike cash rates to higher than expected levels. Global market shares are dropping since consumers face price increases from every direction while growing concerns of a recession due to geopolitical unrest.
So, what does this mean for Perth’s housing market?
Last week, REIWA members reported 869 property sales in Perth, a decline of 12.8% from the previous week. This is due to an 11% drop in home sales, a 17% drop in unit sales, and a 16.8% drop in vacant land sales.
While federal elections have historically slowed activity as consumers wait for the results, numerous interest rate hikes are on the horizon, which also appears to be affecting buyer attitudes.
Conditions have changed since 2021. REIWA reports that housing sales have decreased steadily from December 2021 to May 2022. However, unlike large cities on the east coast, Perth is still experiencing growth.
Perth is currently the most affordable state capital, with a median dwelling value of $555,500, making it attractive for buyers. Although there is a decline in owner-occupier demand, investors with new funds and equity may look to acquire properties and benefit from low vacancy rates and rental price growth.
Although further rate hikes are expected, Perth’s housing market should see moderate growth over the next while.
The Labour government’s proposed housing and economic policy
Australia’s new federal treasurer, Jim Chalmers, warns of tough times ahead as he notes the previous government, led by Scott Morrison, has left him in a dire situation.
“There are elements of strong demand, tight labour market, there are some pleasing aspects of the national accounts, but there are far more troubling aspects in our economy,” said Chalmers.
That being said, more social housing was promised by Labour, as well as a strategy of helping 10,000 Australians each year through a 40 percent equity contribution.
Both policies can potentially increase demand in a housing market that is already oversaturated. However, recent data suggests that Australia’s housing boom may be about to an end, with national prices dipping in May for the first time since 2020, as higher interest rates put pressure on buyers.
ANZ chief economist, Shane Oliver, notes that Australia’s property market is “highly sensitive” to changes in the monetary cycle due to high debt to income ratios.
Maintaining economic growth amid rising global tensions and inflation while addressing calls for higher spending from freshly appointed lawmakers will be difficult for the incoming government.
Perth property predictions for July 2022
Bloomberg reports that 79% of economists predict a further rise of 50 basis points in July, which sets the cash rate at 1.35%. This should come as no surprise following a 75 basis point hike by the United States Federal Reserve on 16 June 2022.
The rise in cash rate indicates a further slow in growth in July for Perth’s property market.
Concluding thoughts
Haus Exchange will continue to assess the economy’s performance and bring you regular updates on how it affects the Perth property market.
If you’re considering buying a property, I advise you to make sure your finances are in order so that you can move quickly to avoid rising interest rates.