The Australian real estate market has long been a cornerstone of wealth generation and stability, but in the past two years, it has been significantly shaped by rising interest rates. Despite these financial pressures, home prices across most Australian suburbs have remained resilient. This article delves into the market dynamics that have allowed for such growth, analyzes how interest rates are affecting buyers and sellers, and provides valuable insights on why finding the right real estate agent is essential in 2024. Whether you’re buying, selling, or investing in residential, commercial, or land properties, this guide will help you navigate the complexities of the current property market.

Understanding the Impact of Interest Rates on Australia’s Housing Market

Since May 2022, the Reserve Bank of Australia (RBA) has raised interest rates 13 times in an effort to control soaring inflation. As of November 2023, the cash rate stands at 4.35%, up from 0.1% in April 2022. This aggressive rate-hiking cycle has had a profound impact on the property market, particularly on buyers’ borrowing capacity and housing affordability.

Despite this, PropTrack data reveals that 77% of Australian suburbs have experienced an increase in median house prices between May 2022 and September 2024. Additionally, 71% of suburbs saw an uptick in unit prices during the same period. This trend is unexpected, considering that higher interest rates typically dampen housing demand by making mortgages more expensive and reducing buyers’ ability to borrow. So, what factors have enabled this price growth despite the financial squeeze?

The Affordability Factor: Why Some Suburbs Thrive Despite Rate Hikes

One of the main reasons for continued price growth is affordability. As interest rates have climbed, borrowers have adjusted by shifting their focus to more affordable suburbs, particularly those in South Australia, Queensland, and Western Australia, where property prices are still relatively lower compared to larger markets like Sydney or Melbourne.

According to PropTrack senior economist Angus Moore, affordable areas have been the most resilient, with many suburbs in Adelaide, Brisbane, and Perth experiencing significant price growth. The key driver behind this is simple: while rising interest rates have reduced overall borrowing power, affordable suburbs allow buyers to stretch their dollars further. As a result, these areas have seen higher demand, contributing to steady price appreciation.

For instance, in Adelaide, a city renowned for its lower cost of living, several suburbs have reported extraordinary growth. Suburbs like Davoren Park and Elizabeth South have seen house prices surge by over 70% since May 2022, making them some of the best-performing areas in the country. Similarly, Ipswich in Queensland and Parmelia in Western Australia have experienced 62% and 78% price increases, respectively.

This shift in buyer focus has not only driven up prices in affordable areas but has also made them attractive to investors. With rental yields in many of these suburbs remaining high, investors see opportunities for both capital growth and strong rental income.

The Challenges Facing Homebuyers: Shrinking Borrowing Power

The biggest challenge for prospective homebuyers in 2024 is the reduction in borrowing capacity due to higher interest rates. As Mortgage Choice broker Luke Camilleri points out, the increase in interest rates has slashed borrowing capacity by 30-40% for most buyers. This means that if a buyer could have borrowed $1 million before the interest rate hikes, they would now only be able to borrow between $600,000 and $700,000.

This reduction in borrowing power has drastically changed the way people approach home buying. Many buyers are now more cautious, focusing on smaller properties, units, or homes in suburban or regional areas where prices are more manageable. In cities like Sydney and Melbourne, where property prices are traditionally high, the ability to borrow less has shifted demand to outer suburbs and even interstate.

Moreover, many first-time buyers and young families are finding it increasingly difficult to enter the property market in capital cities, turning their attention to regional areas where prices are more affordable. This shift in demand has helped drive price growth in regional hotspots, making them viable alternatives to big-city living.

Homeowners Adapt: Downsizing, Investing, and Equity Growth

For homeowners with existing mortgages, the RBA’s rate hikes have increased repayment amounts significantly. However, many have managed these increased costs by adjusting their spending habits and, in some cases, leveraging the equity they’ve built up in their homes during the pandemic property boom.

Equity growth has been a key factor in the market’s continued resilience. Many homeowners have seen the value of their homes increase, which has provided them with more equity to use for renovations, downsizing, or even investing in new properties. Some homeowners, particularly those nearing retirement, are choosing to downsize to more affordable homes, freeing up capital for investments or lifestyle improvements.

At the same time, the appeal of property investment has grown, especially for those looking at interstate options. Investors are seeking opportunities in affordable suburbs in Queensland, South Australia, and Western Australia, where entry-level prices are still accessible, and rental demand is strong. These areas offer excellent rental yields, making them attractive to investors looking to diversify their portfolios.

Regional and Capital City Growth Trends: A Closer Look

Analyzing the data from PropTrack reveals distinct trends in how different regions across Australia have performed since interest rates began rising. Here’s a breakdown of some of the most notable price growth across capital cities and regions:

1. South Australia (SA)

 

• • Davoren Park: Median price rose by 82%, from $255,000 to $465,000.

• • Elizabeth South: Up 79%, with prices climbing from $263,500 to $472,500.

2. Western Australia (WA)

 

• • Parmelia: Surged by 78%, with the median price increasing from $310,000 to $551,000.

• • Camillo: Grew by 77%, jumping from $301,000 to $533,500.

3. Queensland (QLD)

 

• • Ipswich: Prices rose by 62%, from $475,000 to $770,000.

• • Wilston: Home prices skyrocketed by 56%, from $1.21 million to $1.9 million.

4. Australian Capital Territory (ACT)

 

• • Taylor: Experienced a 34% increase, with prices rising from $850,000 to $1.14 million.

• • Denman Prospect: Grew by 11%, from $1.085 million to $1.2 million.

5. New South Wales (NSW)

 

• • Melonba: Saw an impressive 67% increase, with prices rising from $755,000 to $1.26 million.

• • Warnervale: Prices grew by 55%, from $643,950 to $995,000.

Why You Need a Professional Real Estate Agent in 2024

In today’s volatile and competitive real estate market, navigating property transactions on your own can be risky. Whether you’re looking to buy your first home, sell an investment property, or purchase commercial or residential land, a knowledgeable real estate agent can provide valuable insights, negotiate on your behalf, and ensure you get the best possible deal.

Here are key reasons why hiring a real estate agent is crucial:

 

• • Market Expertise: Agents have access to the latest data and trends, ensuring you make informed decisions based on current market conditions.

• • Negotiation Skills: An experienced agent can negotiate on your behalf, potentially saving you thousands in the purchase or sale process.

• • Access to Listings: Many agents have access to off-market properties or upcoming listings, giving you a competitive edge.

• • Guidance Through the Process: From securing financing to navigating legal paperwork, agents ensure every step of the transaction is smooth.

Ready to Take the Next Step? Find the Best Property Agent Near You Today

Whether you’re buying, selling, or investing in the Australian property market, the importance of finding a trusted and experienced real estate agent cannot be overstated. Click here to connect with the best property agents in your area or contact us directly for expert guidance.