While rates remain on hold, the prospects of cuts may add fuel to the fire as sheer demand for affordability has pushed prices higher.
The most affordable properties are outpacing the top end in price growth now.Home buyers are turning to more affordable properties after two years of higher interest rates slashed the amount of money they could borrow.
The Reserve Bank on Tuesday held the cash rate at 4.35 per cent. The board indicated that inflation was persistently high and did not rule in or out further rate rises. He said there was an increasing divergence in the rate of price growth between expensive and more affordable properties, including stronger performance in the unit sector.
Hassan said the slowing of the top end could indicate affordability was hitting a hard limit, and that prices were approaching a peak. “We know the bank of mum and dad has been a more prominent source of funding … I suspect it’s now becoming a prerequisite in some of the smaller capital cities’ markets as well,” he said.
Price growth in the more affordable end of the market would begin to lose steam if rates continue to rise, as it would become unattainable for even middle income earners, Lawless said.“It probably means we can see renewed price growth. The underlying affordability pressures are still going to be there … The undersupply of housing is a key factor of propping up property prices.”
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