Realtisan Weekly Review: Australian Central Bank’s Rate Hike Nearing End, High Rental Growth Expected to Ease Next Year!

Weekly News

  • RBA’s Interest Rate Hike Approaching Tail End, Projected Easing of High Rental Growth Next Year!
  • Chinese Buyers’ Investments in Australian Properties on the Rise! Daily Average Spending of $6.3 Million on Purchasing Homes.
  • Rapid Population Growth Driving Escalating Australian Property Prices.

RBA’s Interest Rate Hike Approaching Tail End,

Projected Easing of High Rental Growth Next Year!

RBA indicates nearing the end of rate hikes, expecting rental growth to ease in 2024. CoreLogic’s analysis suggests inflation slowdown will relax the tight rental market by 2024.

Cash rate to range from 4.1% to 4.6%. NAB and Westpac predict 4.6% by Sep, CBA expects 4.35% by Aug. ANZ won’t raise rates but will reassess after June inflation data.

RBA paused rate hikes in July to assess impact of 12 increases. Potential rate cut in 2024, aiming for 2%-3% inflation by mid-2025.

Good news for renters, as rents, interest rates closely linked. Rents remain high but started to slow down.

Higher interest rates drive rents up, not solely due to costs. Tax data shows 47.1% investors used negative gearing, rents didn’t cover costs before hikes.

In June, CoreLogic estimates median rent up by AUD 225, investment loan cost up by AUD 948. Landlords capitalize on tight market to maximize returns. Rent surges with intense competition, difficult negotiations.

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Chinese Buyers’ Investments in Australian Properties on the Rise! Daily Average Spending of $6.3 Million on Purchasing Homes.

Chinese buyers continue to increase their investments in the Australian real estate market! The latest foreign investment data shows that they have been spending an average of $6.3 million on Australian residential properties every day over the past 9 months.

According to the foreign investment quarterly report released by the Federal Treasury last month, Chinese buyers purchased a total of 1,775 Australian homes from July 2022 to March 2023, with a total value of $2.3 billion, making them the top foreign buyers in the market.

In comparison, during the 2021-22 fiscal year, Chinese buyers spent $2.4 billion on 2,317 Australian residential properties, indicating their increasing enthusiasm for the Australian property market.

In the first three months of 2023, Chinese inquiries about Australian properties increased by 127% compared to the previous quarter, and it is expected that Chinese investment in the Australian property market will grow by at least 30% in 2023, demonstrating their sustained confidence in the Australian property market.

According to PropTrack data, Chinese searches for properties in Victoria on the website increased by 42.88%. While searches from the UK, New Zealand, and the US are also substantial, the activity in the Chinese market is particularly noteworthy.

PropTrack economist Anne Flaherty points out that the lifting of the travel ban in January injected new vitality into the Australian property market. Many buyers are willing to pay a premium for properties located in high-quality school districts and near excellent schools, further driving the growth of the Australian real estate market.

It is worth mentioning that some buyers are even willing to pay an additional premium of 10% to 20% for properties in premium school districts, which could increase the sale price of each property by tens of thousands or even hundreds of thousands.

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Rapid Population Growth Driving Escalating Australian Property Prices.

Australia’s housing crisis remains in the spotlight. Despite ranking fourth in new residential properties per capita among OECD member countries, various factors contribute to the current housing challenges.

During the pandemic, Australians’ lifestyles changed, altering housing demand. Population growth reached historic highs.

Outgoing RBA Governor, Philip Lowe, warned of continued high rental increases due to rapid population growth, primarily driven by adult immigrants.

The increase in empty-nesters and vacant properties affects housing supply. Over 13 million bedrooms remain unoccupied, causing price surges in smaller housing units.

While not the primary driver, reducing housing sizes affects family home supply in the market, becoming a potential political issue.

Solving the crisis demands comprehensive policies for sustainable housing solutions. Australia needs proactive measures to balance the housing market and protect housing rights amid population growth challenges.

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