It’s still early days people. We’ve seen just two rate rises for a cash rate of 0.85%. Six weeks ago the cash rate was still only 0.10% and many folks were still betting the RBA wouldn’t hike rates at all. The increases in rates haven’t started to bite yet, except perhaps only on the psychology of new entrants to the market.
A couple more rate rises this year will take the cash rate to about 1.5%, maybe higher. When mortgage holders who were able to get sub-2% fixed rate home loans come off those and have to pay 3% plus variable rates next year, that’s when we will really see an effect on prices. Won’t be long before the gains from the pandemic have all evaporated.
Whatever market went up 50% needs to fall 33% to lose all its gains. Similarly, what went up 25% only needs a drop of 20% to be back to where it started. Most analysts, in estimating a 15% drop in house prices are underestimating the price declines. Top quartile suburbs in major capital cities and regional coastal towns, which boomed the most in the last couple of years, will cop it the hardest.
