Navigating the Housing Maze: Soaring Interest Rates and the Search for Affordable Options

The real estate sector is dynamic and consistently evolving. Many factors contribute to the demand and supply of it. In recent years, this industry has experienced significant shifts. The pandemic, rising cost of construction materials, and high-interest rates have mainly contributed to this change.

Consistent economic growth in Australia has positively influenced the property market. It has been relatively stable with gradual and steady price growth over the long term. Many factors contribute to the success of the property market. Namely, robust population growth, sustained development of major cities, government initiatives, such as first home loan deposit schemes, and the availability of diverse property types. A high demand for rental properties in the market has also provided a steady income for investors.

However, with the recent economic changes and the interest rate hikes, the property market faced two main challenges, increased borrowing rates and reduced investment. Given below are some sectors that were affected, namely First homebuyers, Homeowners, Renters and Sellers, and Commercial Properties.

First Homebuyers

First Homebuyers are those who purchase their first home. High interest rates have reduced the homebuyers’ borrowing capacity and made loan repayment difficult for them. Some first-time owners have been completely put off and have given up on their dreams of owning a home, at least for a while.

When we first bought our home online through an auction during the pandemic, interest rates were low and property prices were high. But that didn’t stop us from purchasing a beautifully designed home in Mulgrave.

I immediately fell in love with the beautiful architecture of the house. The low bay lounge windows, elegant fireplace and rooms with backyard views of the kumquat trees etc., made the purchase an easy one.

Building a brand-new home

Home builders had to delay or halt construction, due to elevated costs of materials and low supply, due to recent global changes.

When the cost of building materials increased, some builders could not keep up with the rising costs. This affected their income because construction costs exceeded the fixed contract prices agreed upon with their clients. As a result, some builders faced bankruptcy. One such example was the collapse of the builder, Porter Davis.

Homeowners

Some homeowners have also been struggling to repay the first home loan amount due to high interest rates.

Renters.

Rental prices have also seen an increase, while limited choices exist in the rental market.

Sellers

Homeowners are postponing their decision to sell their homes, in the hope of getting better prices when the market becomes more favourable.

Commercial and Industrial properties

For some commercial and industrial real estate, the situation is also similar. During the pandemic, more people started working from home, so companies needed less office space. But as life started getting back to normal, the demand for space reduced, as many people continued to work from home. However, this situation is expected to change in the coming months.

In a nutshell, buyers, sellers, and investors must navigate a landscape influenced by an array of factors.