Australia’s leading property markets are booming. Sydney’s median house price is approaching record levels and Melbourne’s market is not far behind. One reason for the rising property prices are continuing low interest rates. The Reserve Bank of Australia (RBA) kept interest rates on hold at a record low 0.75 per cent this week, following another strong month for the Australian property market. Coronavirus and interest rates Concerns over US-China trade issues and more recent concerns over the Coronavirus are yet to play into rate movements, however they do remain a concern for RBA governor Phillip Lowe as they could “wreak havoc” on a “reasonable” global economic outlook. According to Corelogic’s head of research Tim Lawless, the Coronavirus could be a real worry for the RBA moving forward. Alongside the full ramifications of the bushfire crisis, Lawless believes, “The RBA may need to keep some rate cutting ammunition up their sleeve should these scenarios play out more severely than expected.” At this point, it is unlikely that rates will drop further in March and even less likely that the banks will pass on any cuts in full if they do. There are some expectations that we could see a fall in April with some traders pricing in a two-thirds chance of interest rates being at 0.5 per cent or lower after April's RBA meeting. Any further drop would fuel the property market further especially in Sydney and Melbourne where house prices are once again rising. Property market could hit record highs. There’s no doubt home loan borrowers have the upper hand over lenders at the moment with regard to interest rates. Low home loan interest rates are fuelling a new property boom which is having a positive impact on the property market as a whole. Dwelling approvals saw their first annual rise since mid-2018; the value of new mortgage commitments are up 5.9 per cent over the year to November, driven by a 10 per cent increase in owner-occupier commitments and national housing values have risen 6.7 per cent since the first rate cut in June 2019 through to the end of January this year. “An extended period of low interest rates will be required in Australia.” The property market outlook for 2020, overall, seems strong and could remain stable as there is no obvious move in sight to raise interest rates. “Due to both global and domestic factors, it is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target,” Dr Lowe said. Sydney, Melbourne property prices rising in 2020 Property prices rose in all eight Australian capital cities in January, with Sydney and Melbourne leading the charge. Sydney median home prices grew 1.1 per cent and Melbourne’s grew 1.2 per cent over January 2020. Both cities are approaching their respective 2017 peaks. This is a trend that has continued for 12 months, with the Sydney and Melbourne markets pushing around 8 per cent higher during this period. Sydney has grown 5.6 per cent in last quarter, while Melbourne values are just 1.2 per cent off their 2017 peak and Sydney 5.4 per cent from theirs. The Sydney median house price is now $994,300 and heading quickly towards $1 million, while the overall median residential property value – including apartments – is a staggering $862,814. Tim Lawless said of the rise in property values: “With housing values rising at the quarterly pace of 3.7 percent, we are likely to see a nominal recovery in the national home value measure within the next two-to-three months. Looking nationally, the Brisbane median property value has risen to $499,691, Canberra boasts an average price of $630,078, Adelaide is up to $437,411 and Hobart has a median value of $481,665. Western Australia’s property market in recovery Western Australia’s housing market has continued in the doldrums with depressed prices throughout 2019 as other capital city markets picked up speed. Now Perth’s housing market is showing signs of recovery, with January recording a 0.1 per cent increase. REIWA President Damian Collins said it is pleasing to see prices stabilise or increase for three months in a row. In addition, prices have also risen 0.6 per cent since bottoming in October 2019. “Breaking it down into houses and units, reiwa.com data shows that the median sale price remains at $480,000 and $375,000 respectively for January,” Collins said. “reiwa.com data showed there was a shift in composition of sales in January compared to the previous year. A greater proportion of transactions (approximately 30 per cent of all sales) occurred below $350,000 which could suggest that first home buyers are making the most of the lower interest rates.” That’s the bottom line really. Prices are rising, but with interest rates remaining at record lows – for now at least – there are bargains to be found. Keep up to date with the latest interest rates outlook for Australia and compare home loan rates at InfoChoice. This article is news and information and is not intended as financial advice. InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible. 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