- Rising interest rates could have a severe impact on the Australian property market.
- Studies have observed that young investors are more affected by the tremendous rise in interest rates.
- The federal and state authorities are considering initiatives to tackle the housing crisis.
Australia is experiencing an acute housing crisis, with many expecting the market to crash soon. However, it is not a matter of surprise. With the cost of living going through the roof in response to consecutive interest rate hikes, it was very much expected that the housing market may crash in the coming weeks.
The rise in interest rates has dealt a major blow to the property space. Over the last couple of months, the Reserve Bank of Australia (RBA) has raised interest rates thrice from the record low of 0.1% to a staggering 1.35%. The hikes are aimed at allowing the economy to recover from the impacts of the COVID-19 pandemic, Russia-Ukraine war, energy crisis and recent floods in the country.
With the rising interest rates and household expenses, it is getting tougher for Aussies to make their mortgage repayments. As a result, many people are contemplating to sell their properties. However, experts suggest that selling properties is not an optimum choice right now. Rather, this is the time when people should reassess their investments.
Various surveys have highlighted young investors as the most affected by the tremendous rise in interest rates, while older investors as more prepared for the situation.
What is the government doing to address challenges?
Recently, the federal and state authorities held discussions to address the housing challenges.
The newly elected Australian federal government has vowed to address the concerns in order to lower homelessness and improve the housing conditions. The party intends to bring in initiatives to help improve housing affordability in the country. Additionally, according to the federal government, regional first home buyers will be provided support to purchase their first homes.
One of the many plans is a Housing Australia future fund valued at AU$10 billion. In the initial five-year period, the fund would aid the construction of 30,000 affordable and social housing properties.
There is a significant potential for the housing market to experience a crash soon amidst rising interest rates and skyrocketing living expenses. Any further increases in interest rates could add fuel to the situation.
However, property investors can save themselves from massive losses with proper planning and right decisions. Additionally, initiatives from state and federal authorities, which aim to launch more viable schemes for home buyers in the country, are expected to address the concerns.