Housing market remains resilient despite interest rate rises
Despite concerns about the impact of rising interest rates on the Australian housing market, experts are predicting that demand for properties will likely remain strong in the coming months. Even though interest rate hikes are coming faster than expected, coupled with declining lending volumes, property sector players remain bullish and say the market is still resilient.
The Australian reported that National Australia Bank's volume of stressed loans, where payments are more than three months late, is pushing toward new lows. This time last year, before interest rates began to rise, NAB's ratio or impaired loan/total lending was 1.13%. The latest update from the bank, which includes small to mid-sized business loans, shows it is currently at just 0.7%.
In the bank's recent update, Ross McEwan, NAB CEO, said that the drop reflects "continued improvement" in mortgages. According to The Australian, McEwan revealed that 70% of customer home loan repayments are ahead of schedule. However, to offset the impact of more rate rises, McEwan has outlined strategies for the bank's mortgage customers, including accessing redraw facilities, fixing loans, and adjusting loan repayments. McEwan said that as the economy changes, the impacts of higher inflation and interest rates are mitigated by low unemployment and healthy household and business balance sheets.
According to REA Group, the housing market is moderating; however, the number of buyer inquiries the property tech company has recently received is staggeringly high. REA Group CEO Owen Wilson says that with the current environment and increasing immigration, the demand for property will remain high, giving sellers the confidence to list on the market if they need to. Wilson told The Australian, "As interest rates continue to rise, we do expect the market to continue to moderate. But if you look at it from today, if we lose another 5% off property prices, we're only back to August last year. Another 10% and we are only back to May last year. All that's really happening here is the froth has been taken off the top of the market." Wilson continued that demand will remain robust due to strong economic fundamentals, with the July data showing national residential listings up 7%.
The economic climate is changing, and your financial portfolio must be built upon a firm foundation. Speak with one of the Concise Finance team today, and we'll ensure you cover any risks that may come your way.