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House prices bounce back - what does this mean for first home buyers?

Mark Bristow avatar
Mark Bristow
- 4 min read
House prices bounce back - what does this mean for first home buyers?

Australia’s housing market may be recovering from its recent downturns, thanks to rising home values and more housing stock. Higher house prices could prove challenging for some first home buyers to overcome, though it’s possible the recovery could stall later in the year.

What’s happening to Australian house prices?

According to CoreLogic, the combined value of Australian housing reached $10 trillion at the end of August 2023. This was the first time Australia’s total estimated housing value hit double digits since June 2022. The median home value in Australia reached $732,886 at the end of August 2023, while the stock of housing increased to around 11 million properties. 

So why are house prices rising during a cost-of-living crisis with rising interest rates? According to CoreLogic, it’s a combination of rising net overseas migration increasing demand for housing, more Australians using their savings, equity or profits from previous home ownership to buy properties rather than borrowing, and total listing volumes remaining rather low, with total listings across Australia sitting at around 136,000 in the four weeks ending 3 September 2023, which is -23.4% lower than the previous five-year average.

Despite the consistent rise in housing values over the past six months, the market outlook remains highly uncertain, according to CoreLogic. Forecast rises in unemployment and falls in economic performance, plus a relatively high serviceability buffer, could all affect the ability of Australians to service mortgages, and in turn affect housing values.

“CoreLogic is expecting some heat could come out of the recent recovery trend toward the end of this year, while a more robust recovery in housing values will be limited until credit conditions loosen.”

What does all this mean for first home buyers?

The impact that economic data will make on first home buyers will always vary depending on each buyer’s personal financial situation.  

Rising housing values can be a mixed bag for first home buyers. On one hand, higher house prices make it more expensive to get your foot onto the property ladder. But on the other hand, if you’re in a position where you can afford to buy your first home soon, its rising value could help you to build equity in the property faster, opening up options such as refinancing or accessing equity to renovate further down the track.

CoreLogic is forecasting that house price growth could start to stall later in the year, which could potentially give some first home buyers the chance to catch up. However, if prices do stall, this may be because of higher unemployment and lower economic performance, which could mean you’re not in a position to afford your first mortgage.

While many economists are forecasting that the Reserve Bank of Australia (RBA) could keep interest rates on hold for the rest of 2023 and part of 2024, this doesn’t stop banks and mortgage lenders from hiking interest rates out of cycle from the RBA. And while some are predicting that the RBA’s next move could be a cut, lower interest rates could potentially contribute to CoreLogic’s forecast that house prices could recover further, as it may become easier for borrowers to service higher mortgages, pushing up house prices.

It's essential for first home buyers to carefully assess their own financial situation, as well as their personal goals and reasons for buying property. It’s also important to compare home loan options for first home buyers from different lenders and look into what support may be available to you, from buying with a guarantor to accessing government grants and guarantees. A mortgage broker may be able to help a first home buyer to navigate the many factors that go into your fiat home loan, and help you work out the best way to purchase your first home.  

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Product database updated 22 Jun, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.