RBA held interest rates. What's the effect on the property market?

The RBA has held interest rates once again. This is the 6th consecutive time the RBA has kept interest rates at 4.35%. That means property investor’s borrowing capacity has not changed since November 2023. This move, while seemingly neutral, holds significant implications for the broader economy and, more specifically, for the property market.

Another hold on interest rates is believed to be as good as a decrease. It signals a stabilizing economy, with inflation under control and less immediate pressure to curb economic overheating. This implies a more predictable financial environment, fostering consumer confidence and steady spending patterns.

The positive impact on the property market is that a steady interest rate can be a powerful stabilizer. With cash rates remaining unchanged for eight months, investors gain more control and a clearer understanding of their borrowing capacity. This stability provides a clearer picture for investors, allowing them to make more informed decisions without the looming threat of sudden rate hikes.

The combination of stable interest rates and affordable property prices in both Melbourne and Regional Victoria, along with a recovering market and increasing rental yields, presents a prime opportunity for property investors to capitalize on potential growth. According to the Home Value Index by CoreLogic, while property markets in other cities have shown strong price increases over the last 12 months, Victoria remains a relatively affordable option. This means Melbourne’s median price is lower than that of other capital cities like Sydney, Brisbane, and Canberra, and is even below the national median price.

This means now is the perfect time to enter the Victorian property market, as median prices are expected to grow towards the end of the year (Q3 and Q4 2024). According to The Price Predictor Index – Winter edition, 40% of locations in Regional Victoria are now classified as rising, recovering, or consistent markets, while only 25% are ranked as declining. Even better, Melbourne reported an 8% growth in Q1 2024 compared to Q1 2023, indicating that positive sentiment is on the rise in the state.

Overall, the RBA’s decision to hold interest rates at 4.35% for the sixth consecutive time is more than just a pause. This stability, coupled with the affordability of property prices in Melbourne and Regional Victoria, creates an opportune moment for property investors.