Last year delivered three interest rate cuts, with speculation of further reductions. During that period, Melbourne house prices rose 4.8%, according to NAB. This year, the outlook has shifted. The Reserve Bank of Australia has implemented a 0.25% increase, with commentary suggesting up to two further rises. With rising interest rates back on the agenda, buyers and sellers are understandably asking what this means for property prices. To understand what is happening on the ground we spoke with three experienced estate agents across Melbourne. If you’re thinking of selling or buying property this year, their insights provide valuable perspective.

Despite rising interest rates, Melbourne agents report minimal immediate impact on buyer demand or house prices. Buyers are adjusting budgets rather than exiting the market, well-priced properties continue to attract competition, and there is no widespread mortgage stress among vendors. Most agents expect prices to remain stable or rise modestly by year-end, assuming rate increases remain gradual.

Brighton: David Hart, Buxton

Q. David, how do you think buyers are reacting to the interest rate rise?
I haven’t seen any significant reaction from buyers to the recent interest rate increase, however it’s perhaps too early to tell. If there are further rises, this could have a negative psychological effect.
Q. Are borrowers becoming cautious about borrowing?
I haven’t seen any evidence of buyers being notably more cautious than usual.
Q. As a demand lead indicator, how are attendances at open for inspections? Attendances at opens vary with each property and the price range. If they are priced right, then buyers will inspect, otherwise they quickly more onto another.
Q. How many bidders are you seeing at a typical auction compared to say 12 months ago? There seems to be a more positive vibe in the air now from last year. For example, we auctioned a property last October with no serious buyer on the day. We recently re-marketed the property and there were four interested parties keen to
compete. The property was sold pre-auction last week.
Q. Are vendors bringing forward marketing in anticipation of price falls? We are having conversations with a number of vendors, but I don’t think they are necessarily bringing forward marketing because of concerns about falling prices.
Q. Are you getting more or less requests for property appraisals?
There is no marked increase in requests. It is similar to last year.
Q. Are you seeing any mortgage stress with vendors? I’m not seeing signs of mortgage stress. However, some investors are still selling investment properties due to Land Tax and the costs associated with holding the property. So, to that extent, higher interest costs make holding the investment less attractive. There are limited investors currently buying property.
Q. Where do you expect prices to be by the end of the year? Lower, higher or about the same? I expect prices to be stable throughout the year. There is always demand for good property, especially ones which require no work.

Mordialloc: Greg Scherwinski Buxton

Q. Greg, how do you think buyers are reacting to the interest rate rise?
I expect that buyers will pause after an interest rate rise then re-adjust their budgets to cope with the higher costs. This has been what occurred with prior interest rate rises. Q. Are borrowers becoming cautious about borrowing? I have seen no reluctance for people to borrow, however they do seem to be more concerned with living within their means – which is good to see. Q Aa demand lead indicator, how are attendances at open for inspections? Last weekend attendances at our opens were down which may have been a result of the interest rate rise, but I expect to see a bounce in numbers this weekend. Attendances generally are considerably well above the same time last year.
Q. How many bidders are you seeing at a typical auction compared to say 12 months ago? We generally have between 1 to 3 bidders at each auction, depending on the quality of the property. This is more than the same time last year.
Q. Are vendors bringing forward marketing in anticipation of price falls? I see no evidence of this. I don’t think vendors are anticipating price falls but rather steady to slightly higher prices.
Q. Are you getting more or less requests for property appraisals?
We are seeing more requests for property appraisals, but as an agency we work pretty hard to get them.
Q. Are you seeing any mortgage stress with vendors? No, vendors are selling for reasons other than financial pressure. Vendors are still selling investment properties because of Land Tax and other associated costs.
Q. Where do you expect prices to be by the end of the year? Lower, higher or about the same? I believe the KPMGs prediction of a 6% price rise for house prices to be about right. Melbourne prices are lagging behind Sydney, Brisbane and Perth, and I expect to see this gap close, particularly if there is a change of State Government.

North East: Ian Mason, Jellis Craig

Q. lan, how do you think buyers are reacting to interest rate rise? There are no signs yet of buyer reluctance, but I do expect there will be if further rate rises occur.
Q. Are borrowers becoming cautious about borrowing? There is still a healthy appetite to borrow, but it varies depending on the property value. At the top end (around $4m), most buyers don’t need to borrow. In the mid-price range (up to $1.5m) there is some reluctance about borrowing. There are fewer buyers in the $1.5m and $2m price range and many of those buyers are rate conscious. Q. As a demand lead indicator, how are attendances at open for inspections? This is not an auction area with most sales by private treaty. There is still consistent attendances at opens. We usually get 2-3 parties making offers but it depends very much on the price of the property. There is more interest. in lower value properties and demand is thin at the higher end.
Q. Are vendors bringing forward marketing in anticipation of price falls? Not much but it is starting to occur. People are selling investment property due to Land Tax costs and not much prospect of capital growth.
Q. Are you getting more or less requests for property appraisals? It’s about the same as last year. However stock levels are lower and people are sitting on their hands waiting to. see what happens with rates and prices.
Q. Are you seeing any mortgage stress with vendors? There is no mortgage stress as such, but some people (especially small business owners) are wanting to downsize and reduce their debt levels as they are concerned about the future.
Q. Where do you expect prices to be by the end of the year? Lower, higher or about the same?
I expect prices to remain constant or maybe a little higher by the end of the year.

The Takeaways

• All the agents believe this interest rate rise will have no or negligible impact on house prices or demand from buyers, although further rises will eventually have an impact. Notwithstanding the prospect of higher rates, they expect to see a small increase in property prices by the end of the year as borrowers adjust to higher borrowing costs.
• Demand for houses is better than this time last year, with up to 3 interested buyers for each property.
• Well-presented properties are still sought after, providing they are correctly priced.
• There are no signs of mortgagee stress from vendors, although some small business owners are downsizing to reduce borrowings.

If you are thinking of selling property this year, its best to sell when it suits you rather than trying to finesse the market, as it’s unlikely that property prices are going to take off or fall. When selling, we recommend that your property is as well presented as possible, providing it’s done appropriately. We pride ourselves in getting property presentation right to maximise the final sale return. We are always happy to advise on what should be done (or not done) before a property is sold. You can call either Phil 0402 890 830 on or me, Rob on 0418 517 643 as a first step.

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