Aussie suburbs with the most to gain from a rate hike revealed | Ray White economics
Australia’s housing market is closing in on a major change that could add as much as $71,000 to prices in some areas in the space of a month.
Aussie homeowners across more than 1800 towns and suburbs could be set for a house price bump as high as $71,000 within a month of an interest-rate cut.
New analysis by the economics team at Ray White has revealed the value of stand-alone homes across a whopping 85 per cent of the country are likely to increase within weeks of the Reserve Bank’s next move on the cash rate, which underpins mortgage costs and borrowing capacity for the nation’s housing market.
The staggering figures include almost 30 per cent of the area’s assessed where home values will rise at least 1 per cent in the month following the first cut, if history repeats itself.
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The real estate firm’s analysis tracked the first month of activity for the past four interest rate cut cycles, including market booms in 2011, 2015, 2016 and 2019.
It excluded the cuts made during the pandemic as these were made as an emergency stimulus and many housing markets were locked down and unable to function normally.
It found the vast majority of suburbs and towns across the country responded positively to past cuts, with the NSW area of Dee Why the nation’s leader at an average 1.6 per cent increase within a month across the timeline.
If history repeats itself, the coastal Sydney suburb should have its $2.412m median house price jump by $37,450. The pricier area of Bellevue Hill in the suburb can expect the biggest increase in dollar terms, with a more than $71,000 rise likely if it achieves its average 1.1 per cent increase.
But Ray White chief economist Nerida Conisbee said the impact from the next rate cut could be even bigger than history dictated in some areas.
MORE on what a rate cut will do in Queensland
Ms Conisbee said Melbourne and Sydney were the most sensitive cities in the nation to rate cuts due to high house prices and would broadly see the biggest response.
But while Brisbane and Adelaide had historically had a more mild reaction, the pair were more likely to record comparatively larger jumps this time as their home buyers were already highly confident.
Another key to the rate cut’s impact on home values would be in how the Reserve Bank announced it.
“If most people are expecting four cuts next year, that will change sentiment to be far more positive,” Ms Conisbee said.
But the big factors will still be the cost of living, the supply of new homes and population growth.
“Population is still moving and that is fundamentally the driver of prices,” Ms Conisbee said.
“Especially if you don’t build enough housing.”
The economist said she believed there would be a rate cut this year or by March at the latest, but that it would only be a 0.25 per cent improvement for mortgage holders.
WHAT a rate cut might mean for Sydney’s suburbs
While the firm’s analysis tracked what would happen in that situation, she said a 0.5 per cent cut could cause an even larger increase in home values — but would not double the growth.
Ms Conisbee said in Adelaide, Sydney and Melbourne the area’s most likely to benefit from a rate cut were those with high numbers of family homes, and with good schools.
In Queensland, coastal lifestyle hubs along the Gold and Sunshine Coasts were the most likely to get the best of a rate cut, based on historic trends.
Top Areas For a Rate Cut Boost
NSW
Dee Why: $37,450 — 1.6%
Manly Vale-Allambie Heights: $43,288 — 1.6%
Kellyville: $29,846 — 1.6%
Castle Hill: $34,254 — 1.5%
Ermington-Rydalmere: $27,216 — 1.5%
TO SEE THE FULL LIST FOR NSW CLICK HERE
VICTORIA
Doncaster East: $23,322 — 1.4%
Templestowe Lower: $20,299 — 1.4%
Glen Waverley: $22,867 — 1.3%
Vermont South: $19,961 — 1.3%
Vermont: $16,586 — 1.3%
TO SEE THE FULL LIST FOR VICTORIA CLICK HERE
QUEENSLAND
Palm Beach: $17,546 — 1%
Miami: $16,267 — 1%
Peregian Beach-Marcus Beach: $16,629 — 0.9%
Noosa Heads: $18,716 — 0.8%
Mermaid Waters: $14,591 — 0.8%
TO SEE THE FULL LIST FOR QUEENSLAND CLICK HERE
SOUTH AUSTRALIA
Fulham: $6,202 — 0.5%
West Beach: $6,996 — 0.5%
Beaumont-Glen Osmond: $8,307 — 0.5%
Toorak Gardens: $8,562 — 0.5%
Colonel Light Gardens: $5,321 — 0.5%
TO SEE THE FULL LIST FOR SOUTH AUSTRALIA CLICK HERE
*Source: Ray White economics team
A rate cut could also help “stabilise” the rental market, as many landlords have raised rents to accommodate heightened interest payments for their investments.
“If that cost goes down, it won’t be so hard to pay a loan and you might not be so motivated to raise rents,” Ms Conisbee said.
HOW South Australia’s home values could respond to a rate cut
But it’s not all good news for the property market.
“There’s always a risk to affordability when prices rise,” Ms Conisbee said.
“So for first-home buyers, a fast-moving market could be challenging. If someone wanting to buy a $700,000 home finds it has gone to $720,000, they will need a bigger deposit.”
Australian Bureau of Statistics figures show there was a 5.1 per cent uptick in home loan numbers within a month of rate cut announcements in 2019, hinting a demand uptick is likely following a cut.
But Real Estate Institute of Australia president Leanne Pilkington said she was not convinced there would be an instant boom.
Ms Pilkington noted there had been a sustained increase in home prices across most of the country in the past year and the prospect of another rapid surge could strain even the best performing markets.
MORE on what a rate cut might mean for Victorian homes
Meanwhile markets that had lagged, like Victoria, were also unlikely to surge rapidly as they were still grappling with a high number of homes for sale across the state.
“I don’t know that they actually will go straight up, I think the first rate cut everyone will breath a bit of a sigh of relief,” Ms Pilkington said.
“And if it looks like they will continue to trend lower, then prices will increase. We have just had so much pressure on prices and on people’s finances already.”
A second and subsequent cuts would however rapidly deliver increased home prices across the country, she said — including in Melbourne.
However, with investors from both NSW and Victoria now looking interstate for better prospects, Ms Pilkington said it was likely home values in Adelaide, Brisbane and Perth could potentially see the biggest impact when rates are cut.
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