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Interest rates may not rise as high as first predicted

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July 11, 2022

Hi,

Auction numbers were down last weekend but the clearance rate was slightly up.  388 auctions were reported with 206 sold at auction, 54 sold before auction and 128 passed-in producing a clearance rate of 67%.  Strong increase in private sales (which is a typical way of transacting when the market is a little quieter) with 403 reported.

Interest rates went up again last week by 0.5%, bringing the cash rate to 1.35%.  It seems the goal of the RBA is to bring the official cash rate to a more normal level of 2.5% as quickly as possible to assist in getting inflation under control (ideally between 2-3%).  A tricky feat with consumer demand not the only reason why prices of fuel, food, power, etc have increased.  Many external factors such as floods and war are also contributing to high inflation.  There has been lots of talk overnight with a few economists and CBA suggesting that if the interest rate rises resulted in a strong, negative impact on the property market, the interest rate rises could come to a grinding halt.   So whilst we are expecting interest rates to rise further, it seems the sentiment now is they won’t go as high as some previously believed.

There is no doubt the interest rates rises are affecting the spending habits and limits of some property purchasers with some bidders waiting for a property to pass-in to then negotiate the purchase.  Other auctions though still had strong competition.  2/34 Orange Grove, Camberwell is a 2 bedroom, 2 bathroom villa unit quoted at $1,000,000 to $1,100,000 prior to auction. Six bidders participated in the auction with the property being announced on the market at $1,060,000 and selling for $1,206,000.

Have a great week.

Kim Easterbrook

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