Eight consecutive interest rate rises cause property sales to plummet

Rising interest rates have caused a dramatic downturn in property sales over the past 12 months as many Australians hold out for the cash rate to stabilize.

The Reserve Bank of Australia has hiked the nation’s cash rate eight times in the past year from a historic low of 0.1 per cent to the current 10-year high of 3.10 per cent.

Governor Philip Lowe warned during the latest hike that more interest rate rises will occur in the new year.

Data from InfoTrack shows interest rate rises have become a headwind for property sales, slowing a previously hot market to lukewarm.

But prices remain stubbornly high as the nation faces an affordable housing crisis.

The decade-long high of the cash rate seems to be deterring buyers and sellers amid fears of large mortgage repayments and the uncertainty of how high the borrower’s payments will go in the current financial climate.

Since May, the average borrower with a $500,000 mortgage is paying an extra $834 a month due to the consecutive rate hikes.

InfoTrack global head of property John Ahern said inflation, rate hikes, and stagnant wage growth coupled are contributing to potential buyers and sellers holding onto their property or deposit to weather the cost-of-living storm.

“Our figures show buyers and sellers have become increasingly pessimistic in the past 12 months as Australians worry more about inflation and the broader economy,” Ahern said.

“It would seem more people are waiting for certainty and stability about what potentially lies ahead – especially when it comes to interest rates, which are having a tremendous impact on their day-to-day lives.”

Property sales have plummeted by 40 per cent in Victoria and Queensland in the year to November and 38 per cent in New South Wales in the same period of time, InfoTrack data showed.

October has been the “worst month” for property buying activity since interest rates started rising in May.

“Due to the consecutive month-on-month effect of the rate rises, we’re seeing a more significant weakening of consumer sentiment when it comes to the housing market,” Ahern said.