- A-grade property buyers have made peace with rising interest rates
- It is likely we are nearing the peak of the interest rate cycle, says buyers agent Ben Plohl
- He noted a property in Sydney that still sold for $300,000 above reserve
It appears that buyers of A-grade property in Sydney have made peace with both rising interest rates and inflation, with strong prices still being recorded.
Ben Plohl, BFP Property Buyers Founder and Principal, who is also a chartered accountant, noted the latest Australian Bureau of Statistics (ABS) data which shows the Consumer Price Index (CPI) rising to 7.3% over the year to September. As a result of this, further cash rate rises are expected, but he expects that savvy buyers will still be out in force in Sydney.
“There was somewhat of a lull in the market a few months ago when the rising interest cycle began, but that appears to be behind us now, with strong prices still being achieved for Sydney A-Grade property in particular,” Mr Plohl said.
“While the macro-economic inflation reading of 7.3 per cent annually is clearly a concern, it’s important to recognise that the quarterly result of 1.8 per cent over the past two quarters were both reductions compared to the first quarter of this year.
“Likewise, most of the major contributors to the high inflation reading are experiencing temporary rather than permanent price pressures.
“For example, new housing is a key contributor due to labour shortages in the construction industry as well as the continuation of material shortages. However, the rate of new dwelling price growth eased in September compared to the previous two quarters, according to the ABS.”
Ben Plohl, BFP Property Buyers
Mr Plohl noted that it is only relatively recently that the rising interest rate cycle had started to impact spending behaviours, which could assist with lower inflation readings next year and beyond.
“According to the Federal Budget, we are also nearing the peak of the cash rate in this cycle, plus, the government is forecasting softer economic growth and higher unemployment within the next year or two,” he said.
“My advice to existing or prospective property owners is to make room in their household budgets for slightly higher mortgage repayments than they are currently paying, but also consider that with softer economic growth predicted, interest rates are likely to be reduced over the medium-term.
Mr Plohl noted that his team missed out on a property for a client that ultimately sold for $300,000 above the reserve – a sign that is hardly reflective of a freefall market.
“On the ground in Sydney, it’s clear that premier properties have held their price points with solid volumes through open homes and strong offers being put forward,” he concluded.
