2nd June 2022 / Prue Fletcher: Will a Rate Increase Cause Property Prices to Fall?

With so much of our attention having been preoccupied with the recent federal election, the reality of higher interest rates has been somewhat of a distant memory.

So how have we seen it playing out in the market?

New figures are showing homeowners are refinancing in their droves, taking advantage of what are still record-low interest rates to climb the property ladder, maximise the value of their existing property or hunker down before another rate rise hits.

ABS data reports that in March 2022, the value of external refinancing was 28.2% higher compared to a year ago and according to Pexa finance specialist Mike Gill, 'the current volume of refinancing deals is well above historic levels'. Pexa's index for refinancing was 50% higher than the corresponding month last year. Interestingly, the activity is consistent across every state and led by those living in the outer suburbs of our capital cities.

The market sentiment remains, that desirable properties in sought after locations are still selling well and that we are seeing buyers acting sooner to try and lock in the current interest rate. Like all of us over the past two years, there is still some resilience left in the market, and results such as those achieved at 412 Wattletree Road, Malvern East proves there are 4 million reasons why investing in bricks and mortar is ALWAYS a good idea.

Partner & Auctioneer Steven Zervas

After the initial rate rise in May, Senior Property Consultant Gail Logan ran a superb campaign for her clients at 1/110 Morack Road, Vermont South, engaging Director Mark Fletcher to auction the property which sold after almost 45 minutes of hotly contested bidding for $1,192,000. Six bidders fought to secure the home, with the starting bid taking off from $800,000. A well-run campaign and evidence that blue chip offerings with long-term stakeholders are still attracting strong competition..

If there's one lesson to learn when the dust settles from an interest rate rise, it's this: a purchase in this market should never be a short-term strategy. What happens next month or next year shouldn't be your primary concern. Instead, double-down on the disciplines that will get you into the market. You'll never do anything if you worry about the next headline or economic challenge and there is gold to be found in the age-old advice 'don't wait to buy real estate, buy real estate and wait'.

Across the board, we are seeing our agents really hone their craft when it comes to negotiations, with more and more properties selling outside of auction conditions, demonstrating the need to engage highly skilled agents who are equipped to manage all forms of negotiation. In late Autumn, Blackburn Senior Property Consultant Ian Van Eijk achieved a successful result for his vendors at 140 Surrey Road, Blackburn. Fully renovated and within walking distance to all amenities, a move was made to secure a sale prior to auction; reconfirming that properties in highly sought-after locations are still in hot demand and buyers are working hard to secure opportunities before another rate rise hits.

140 Surrey Road, Blackburn

Director Daiman Kane presided over a seamless campaign for his owners at 25 Ursa Street, Balwyn (after previously selling them into the home 15 years prior). Multiple bidders tried different strategies on the day to secure the blue-chip property, with it being knocked down to the eventual new owners for $2,126,000.

In Malvern East, Director & Auctioneer Mark Fletcher sold 412 Wattletree Road for $4,400,000 - a notable increase since the last time it was secured 55 years ago for $44,000! A collaborative result achieved with Fletchers Glen Iris Director Michael Richardson, a Spanish masterpiece on 1,632sqm of land passed in at auction negotiating all evening and into Sunday to achieve a record outcome.

All in all, interest rate rises alone – coming off a historically low base – shouldn't be enough to bring serious distress into the market. Factoring in consistent wage growth, our country's borders re-opening and the resumption of migration, people will continue to need to upsize, downsize, purchase or lease a property and Melbournians can rest easy knowing that their long-term investment is as safe as houses.