December 2022 Market Update

The holiday season is here, and so is another rate rise. The Reserve Bank of Australia (RBA) increased the cash rate to 3.1 per cent as inflation showed signs of slowing in October.

Meanwhile, the pace of decline in home values has slowed to the smallest monthly decline since June. In some areas, property values have returned to pre-pandemic levels, but for many prospective buyers, the fall in prices is being offset by rising mortgage rates.

Are you in the market to buy? Make sure you speak to us about lining up pre-approval so you can move quickly on your preferred property by the end of the year.

Interest rate news

At its December meeting, the RBA increased the official cash rate by a further 0.25 basis points to 3.1 per cent.

It is the eighth consecutive rate hike aimed at curbing rising inflation, which eased slightly to 6.9 per cent in October – down from 7.3 per cent in September according to Australian Bureau of Statistics (ABS) figures.

However, experts are warning inflation may not have peaked yet. While some supply bottlenecks have cleared, increased utility prices are likely to be reflected in the ABS’s December figures which will be released alongside fourth-quarter data in late January.

The RBA’s central forecast is for CPI inflation to be around 4.75 per cent over 2023 and a little above 3 per cent over 2024.

RBA Governor Philip Lowe has warned consumers they could be in for a wild ride with supply shocks expected to continue to impact the cost of living.

The latest rate hike means a $75 per month increase for the average borrower with a $500,000 loan. Since the first rake hike in May, the average borrower’s monthly repayments have increased by $834.

Not all households are feeling the impact of inflation equally. While low-income households face the greatest cost of living pressures, mortgage holders are currently experiencing large increases in their living costs.

Home value movements

House prices fell a further 1 per cent nationally in November, but the pace of decline has slowed. CoreLogic’s head of research Eliza Owen said this does not necessarily point to a recovery in the housing market.

“I think it’s the initial shock of rapid rate rises wearing off,” she said. 

“We’re still going to see a real test to the market in 2023, when a lot of people who secured long, low-mortgage rates on fixed terms are rolling off into an environment where average mortgage rates might be between 5–6 per cent.”

The RBA’s rake hikes have spooked many borrowers, with new home loans hitting their lowest value since December 2020.

“The drop in property prices means first home buyers no longer need to save as much for their all-important deposit, but they’ll still have to prove to the bank they can pay the mortgage at higher rates,” Rate City research director Sally Tindall said.

“While many would-be buyers have seen their budgets self-combust at higher rates, others are keeping a keen eye on the drops, hoping for an opportunity to nab a bargain once prices bottom out.”

A new report predicts property values could rise next year if the RBA pauses its run of rate hikes and inflation is brought under control. Sydney is tipped to see the biggest lift in property values while regional house prices are expected to soften.

All dwellingsAuctionsClearance RatePrivate SaleMonthly home
values change
VIC101356%894▼ -0.8%
NSW89353%1323▼ -1.3%
ACT8055%90▼ -1.2%
QLD25729%1089▼ -2.0%
NT450%26▲ 0.2%
TAS1100%1158▼ -2.0%
SA11056%280▼ -0.3%

* Monthly Home Values figures as of 30 November 2022
* Australian auction results, clearance rates and recent sales for the week ending 4 December 2022
* The clearance rate is preliminary and current as of 9:00 am AEDT, 5 December 2022

There are potentially good buys to be found thanks to falling property values. If you’re ready to buy, talk to us about the right home loan for your needs.

Additional sources
CoreLogic RP Data Daily Home Value Index: Monthly Values