Perth property to plunge 13 per cent

20 February 2023

"REIWA President Joe White offers his advice on rising interest rates and falling property prices. "

REIWA President Joe White offers his advice on rising interest rates and falling property prices.

I bet that got your attention. That was the claim made by the National Australia Bank in the lead up to this month’s interest rate rise. Another commentator suggested an 8 per cent fall.

REIWA does not share their pessimism. Yes, interest rates are affecting household budgets and reducing buyers’ borrowing capacity, but they are not the only factor that impact the property market.

For example, between 2015 and 2019 interest rates fell, yet WA experienced an extended property downturn. Conversely, property prices rose between 2009 and 2010 during a period of rate increases.

WA property prices are currently being supported by ongoing demand and a shortage of housing and this is likely to continue. Our market fundamentals are also strong. We have a strong economy, low unemployment, population growth and affordable housing. While there may be short-term adjustments due to interest rate changes, these factors will continue to support the market in the longer term.

But what if prices fall?

It’s a question I’m often asked, and the answer usually depends on your circumstances.

As with shares, a loss is only on paper until you sell. If you have bought a home and intend to live in it for some time it doesn’t matter if prices fluctuate. Prices trend upwards over the longer term so when you eventually decide to sell you should experience some growth.

If you bought some time ago, such as during a previous downturn, your property is likely to have realised some capital growth, although maybe less than you may have hoped. If you are selling and buying in the same market, the effect of price declines usually balances out.

If you bought during a period of rising prices, just before a decline, this is where you may have some difficulty if you need to sell. You may still see some capital growth depending on where in the cycle you purchased your home, but no one wants to sell if they have negative equity, and it is extremely hard to refinance when this is the case.

Can you wait until things improve? If you can, work to pay down your mortgage and build equity that way. If you do need to sell urgently, speak to your REIWA agent about the best strategy to maximise your price.

REIWA is confident the overall market will weather interest rate changes well, but we know conditions vary from suburb to suburb. If you are looking to sell, I encourage you to speak to your local REIWA agent to get an idea of what is happening in your area. You can also monitor the latest sales and trends in your suburb and surrounding areas on www.reiwa.com.