New report shows how rents and rates are boxing in home buyers

Rising interest rates are becoming a big impediment for home buyers finds a new report from the NAB. With rents also rising, are buyers being boxed in?

Residz Team 4 min read


Home buyers are being boxed in between rising rents and rising interest rates. A new report shows rent rises are outpacing property value growth, but mortgage interest rates are rising too, reducing buyers’ ability to borrow enough money to secure a place of their own. Their reduced borrowing power is driving down property prices, but affordability remains a major problem for many.

Property experts outline biggest issue for buyers

The NAB Residential Property Index Q2 report says for the first time property professionals have identified rising interest rates as the biggest (and a growing) impediment for buyers of existing property across the country.

NAB Economics says it expects rates to rise more quickly than previously, reaching 2.1% by year’s end with more to come in 2023. It predicts this will dampen buyer interest in the big cities.

“We largely see the adjustment in prices coming through reduced borrowing power, which will bind more in the larger capitals that have larger affordability issues.” - NAB Economics

Outlook for property prices shows a larger fall

This ‘adjustment’ is a shocker for home owners who bought in the pandemic property boom. NAB says its outlook for property prices ‘now expects a larger peak to trough fall of around 18%.’

“Sydney and Melbourne are expected to lead the declines, though the impact of higher rates is expected to impact all capitals,” the report says.

As Livewire Markets commentator James Marlay said recently, any loss of faith in the market by the public “will change their view of the future.”


The report shows that as confidence levels in the residential property market ‘continue to sag’, house price expectations for the next 12 months were revised down in all states except the Northern Territory - now 3.0% from 2.4% in Q1.

Property professionals on average still see prices growing (but at much slower rates) in:

But they are now forecasting sharp falls of:

And more moderate falls in:

CoreLogic latest Home Value Index says every capital city and broad rest of state region is now well past their peak rate of growth. Speaking about the index findings, CoreLogic Research Director, Tim Lawless, said housing value growth has been easing since moving through a peak in March last year.

“More recently, surging inflation and a rapidly rising cash rate have added further momentum to the downwards trend. Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth,” he said.

Hobart values dropping too

Sydney and Melbourne saw the biggest drop in dwelling values but CoreLogic reports that housing values were also down in Hobart (-0.2% month and -0.1% quarter) as well as regional Victoria (-0.1% month and +1.2% quarter).  This is the first sign of some slowing of growth in regional areas, which have been surging thanks to Millennial and Gen X buyer interest.

Australia’s third largest city, Brisbane, has seen growth in housing values flatten out to just 0.1% in June, while Adelaide remains the only capital still recording a monthly growth rate higher than 1.0% (1.3%).

Rents expected to keep rising

Despite the property slowdown, home buyers who are renting may have to rent for longer to save a larger deposit. Here they face more hurdles.

The survey suggests rents will continue to grow at above average levels in the next 1-2 years across the country. The NAB report says that for the next 12 months the survey average is for national rents to grow a solid 3.2%, and 3.4% in 2 years’ time. While tough to swallow for renters, it’s good news for investors.

“With rental growth outpacing value growth in the next 1-2 years, rental yields should also rise.” - NAB report

It looks as if a good number of property investors are entering the property market for the first time. The report shows an increased number of First Home Buyer (FHB) investors in the market in Q2 to an above average 12.5% (11.2% in Q1).

The market share of FHB owner occupiers however dipped further to a 3½ year low 28.9% in Q2 (29.3% in Q1) - though still above the survey average (27.3%).

If you’re considering purchasing or renting a house, make sure you download our free property report for that address. We have 12 million addresses in our database, with every report offering information on internet speeds, crime trends, bushfire and flood risks, investability scores and a whole lot more.

Photo by Erda Estremera on Unsplash