After much speculation, the Reserve Bank of Australia announced on Tuesday 3 May that the cash rate target would be increased from 0.1 per cent to 0.35 per cent. This is the first interest rate rise in more than 11 years and it has led to plenty of discussion about what impact this will have on Western Australias rising property market.
REIWAs forecast for property growth is a 10 per cent price rise in Perth during the 2022 calendar year. This forecast, which was released late last year, considered the interest rate rises that were expected to occur in 2022, with REIWA not anticipating moderate rises to have much impact on our local property market.
Interest rate rises to have less of an impact in WA
There are several reasons why REIWA expects the impact to be lesser in WA than other locations around the country. One key reason is our low levels of listing stock. At the end of April, reiwa.com data shows there were 7,920 properties listed for sale. To put that figure in context, we consider a balanced market to be around 12,000 13,000 properties for sale.
With less properties available for sale and building completions sluggish, this has created immense competition amongst buyers.
reiwa.com data shows that in April, the median time to sell a home dropped to just 13 days, with Cooloongup (six days), Tapping, Waikiki, Woodvale, Bedford, Coolbellup, Currambine (all seven days), Brabham, Heathridge and Bayswater (all eight days) the fastest selling Perth suburbs during the month.
While interest rate rises will certainly have some impact on demand, there will not be enough new properties and listings coming to market to sufficiently stifle competition amongst buyers.
Another key reason for why REIWA does not anticipate interest rate rises having the same impact on our local market is that we have the most affordable housing in the country.
Even though Perth home values increased 13 per cent last year and are up a further three per cent in 2022 already, we are still very affordable. In fact, Perth has the cheapest median house sale price of any capital city in the country at $525,000. For comparison, the median house sale prices in Sydney and Melbourne sit at $1.6 million and $1.125 million respectively.
WAs affordable housing and strong economy means that most property owners and buyers are in a good position to be able to afford price increases and manage interest rate rises.