As per Australia’s PropTrack Home Price Index, the country’s property market registered a milestone in February with homes appreciating by 0.4%, indicating Australia is gradually succeeding in its battle against inflation. This signifies a reversal from the sequential declines experienced in previous months.
Also, during this time, some media attention became engrossed with the story of the government’s recently imposed two-year ban on foreign buyers purchasing used homes and its effect towards affordability discourse within the country.
Melbourne and Sydney Blocked by Capital Cities Drive Growth They Lead
Both Capital cities joined the rally with Regionals recording a price increase of 0.45% and 0.28% respectively.
– Melbourne recorded a growth of 0.67% and Sydney had a secondary recovery of 0.50%.
– On a year-on-year basis, Brisbane (10.21%), Adelaide (11.91%), and Perth (13.12%) all logged stronger numbers compared to last year.
While Darwin registered a new record, Hobart experienced a slight decline of 0.03%, which marks the third month of contraction.
Interest Rate Cut Restores Borrowing Power and Demand
The markets have witnessed a boost post the Reserve Bank of Australia (RBA) reduced the official cash rate by 25 basis points to 4.1% which is coupled with even greater expectations set forth by the Bank. Eleanor Creagh, REA Group senior economist, pinpoints that the decrease in rates automatically makes access to borrowing easier, leading to higher confidence from buyers and deeming the prices more affordable.
The downside as highlighted by Creagh is the restrictive nature of poor affordability could suppress how quickly prices will inflate due to still high costs even when rates are slashed.
Ban on Foreign Purchasers: Will it help to increase the availability of reasonably priced homes?
The most current policy release by the Albanese government shows a two-year restriction (April 2025 – March 2027) on foreign investments acquiring secondary market properties (foreign investors purchasing established homes).
Effects on the Other Side of the Market
The proposed regulations will not greatly increase housing affordability even while this is positioned at a contrivance to solve the alarming rise in property prices:
The market dysfunction ascribed to foreign investors’ transactions constitutes less than 0.24% of overall property sales; so, their withdrawal from the market will hardly impose a significant price problem
Most foreign investments go towards new construction; thus, excluding them from purchasing existing homes has little effect on the supply.
To help to minimize stockpiling and increase availability, the new land banking rules will force foreign investors to develop unoccupied property within a specified period.
Loosening of Mortgage Rules – But at What Cost?
This goes hand in hand with the prohibition on foreign investment since the other side of the equation becomes more accommodating with the government lowering strict loan eligibility rules therefore allowing Australians to borrow more.
Still, this may raise the cost of homes and make them even more difficult to find than simpler.
Those making $75,000 a year can now borrow an extra 26,000 dollars.
Those making $125,000 can borrow an extra $95 thousand.
Without an expansion in the housing stock, this further increase in borrowing capacity could aggravate demand, hence making homeownership challenging rather than simple.
Housing Availability
Although reduced interest rates and greater credit possibilities are usually welcomed by buyers as positive news, the problem remains the availability of the houses. Experts say initiatives like prohibiting foreign purchasers and altering mortgage rules will ineffectively address the rising prices without a higher development of new homes.
This is the ideal period for house purchase!
For individuals who want to purchase a house, the continuous appreciation in housing prices makes it challenging; waiting too long could complicate homeownership. Right now is the perfect time to invest.
At Huddle For Property, our main goals are to assist clients in getting a property that suits their budget as well as making wise investment decisions therefore enabling them to take advantage of the always-shifting market. If you want a consultation and start down the road to acquiring your dream house, contact us today at 480 758 738.