Rising interest rates could prompt wave of forced sales, further hitting house prices
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It’s not just buyers who are disappearing from Australia’s rapidly cooling housing market. Many prospective sellers are also holding back, unwilling to accept the falling prices now sweeping the market.
The standoff spells bad news for property companies that rely on transactions to make money. It also raises the prospect that steeper price falls could lie ahead, should rising mortgage rates prompt a wave of forced sales.
On Monday, real estate company McGrath reported an 83% drop in underlying net profit to $1.12m for the six months to December after a weaker-than-usual spring season, marked by reduced sales volumes.
“As expected, the market is taking a much-needed breather after rapid growth over the last three years,” said its chief executive, John McGrath, who expects property prices to start rising again in 2024.
“While the economic climate and impact of further interest rate rises is difficult to predict, we think we are either at or approaching the bottom of this property cycle.”
McGrath generates the bulk of its revenue from Sydney, followed by contributions from Melbourne and Brisbane, which are all locations where new listings have fallen significantly.
Last week, online property portal Domain cited a collapse in new home listings for a near 40% drop in net profit.
The number of new listings are almost one-fifth lower than the same period last year, according to property