RBA Interest Rate Rise

The RBA increased the cash rate by 25 basis points at the November 7 meeting, bringing the cash rate to 4.35%. We consider interest rate rises a very blunt instrument in the fight against inflation.

Our observations reveal a shortage of goods and services, including housing. In short, the supply of goods and services is presently insufficient to meet demand, driving inflation. Increasing immigration is imperative for our economy to grow, but is also increasing demand for housing, resulting in higher rents due to demand surpassing supply.

Despite numerous interest rate rises, the real estate market has weathered them well, with real estate markets across Australia generally rising in 2023. This is contrary to doomsayers predicting a real estate crash in 2023. The likely effect of the latest interest rate rise will be to stall the demand for real estate assets as homeowners and investors re-evaluate their financial positions.

Once the rate rise has been weathered and factored into all real estate participants deliberations, we expect normality to return to the real estate market.