Home Company Blog
The latest interest rate rise and a real estate agents take
By: Jack Wilson
September 08, 2022

After last Tuesdays latest .5% interest rate hike to 2.35%, the dire predictions of property prices have only strengthened in mainstream media. This national situation and the conversation which follows, no doubt has an impact on our local market but to what extent are we experiencing this on the front line.

With an unprecedented rate of growth throughout the pandemic driven ultimately by supply and demand, it was ambitious to say that a depression wasn’t imminent given the trajectory of price increases. So let’s recap the overall generalizations that got us to that position.

‘A subjective uncertainty of what the world might look like post Covid and people shifting their way of living to require a more 'comfortable home environment’, was fueled by a “fear of missing out”.’

Such reasons were not quantifiable or objective, a ‘human element’, which suggests a lack of stability in the foundations holding up the recent growth. But if this had such an influence driving prices up, then why could it not have an influence driving prices down?

Now as the world returns to some normality in their way of living, travelling and spending money, previous motivators are not as prominent. As motivation to buy decreases, interest rates continue to increase and with lending capability for any new home lender going down by approximately 5% with every 50 basis point increase, this would suggest over 20% less in peoples buying capacity so far. A direct impactor on property prices.

Now, if there are more homes to choose from (total listings on market), that are remaining available for longer (days on market increasing), with more options consistently becoming available (new listings to market) and significantly more price reductions being seen, we have to anticipate prices will continue to drop?

If buyers’ are the overarching driver of the property market direction and buying capacity is decreasing as rapidly as interest rates are increasing, then it would be sensible to assume property prices will keep decreasing for as long as the RBA remain on their current path.

What does this mean for our sellers?

We acknowledge that selling a home is often a decision not made lightly and sometimes up to 12 months or longer in the making. Given the volatility of the market, potentially the decision to sell was made when prices were still at record highs. The first step in navigating selling your home in todays market, is acknowledging this is no longer the case.

Prices peaked in different areas of Canberra between October 2021 and March 2022, with the general expectation the market has come back from these peaks between 10-15% in many areas. If in the same areas we saw a 30-35% growth through the pandemic then we are still well ahead of where a “normal” property cycle would see us. Admittedly this can be difficult to grasp when on paper it suggests a value difference of tens, if not hundreds of thousands of dollars but that time has passed, and it is crucial to get up to date with the state of your marketplace now.

So, if it is agreed; 1. the RBA is going to continue to cause property prices to drop further, 2. buyers dictate the market and 3. heightened demand over supply achieves above expectation results. Then setting a more market indicative price initially which meets buyer expectation immediately, seems logical to ensure your property stands out from the crowd, potentially creates competition amongst buyers and could lead to achieving a good result in a dropping market.

Engaging an agent that is not afraid to be questioned throughout that selection process is vital to ensure they are the right agent ‘for you’, so don’t hold back. Substantiating price expectation with a detailed argument and comparable sales will give you an insight into how they operate, but also how they will ‘sell’ your home to potential buyers. Transparency form the start will avoid any surprises for you along the way.

At the end of the day, selling your home deserves respect and with excellent Communication, Reliability, Empathy, Attentiveness and Morality you can be assured that is exactly what you will get.

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Written by
Jack Wilson
A long career as a professional sportsperson has encompassed experience from industry leaders and business professionals from...
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