Interest Rate Rises: Six in a row, what next?

For the sixth time in a row, on 4 October 2022 the Reserve Bank of Australia raised official interest rates by 25 basis points (0.25%) to 2.60%. This is up from 0.1% in April 2022. Major lenders were predicting a rise of between 25 and 50 basis points, with the Reserve Bank adopting the lower end of this anticipated range. In their statement, the Reserve Bank recognised the substantial increase in the cash rate over a short period of time, noting it will continue to assess the outlook for inflation and economic growth in Australia.

Residential Markets

Market conditions across Sydney, Melbourne and now Brisbane have weakened significantly with dwelling values across most of these market segments now in decline. A combination of consecutive interest rates hikes, rising inventory levels, surging inflation and lower consumer sentiment is resulting in weaker market conditions. These factors, together with affordability constraints, is contributing to a market favouring buyers.

As borrowers are impacted by higher interest rates and rising household expenses due to inflation, it is expected that a further decline in consumer confidence and lower housing demand will continue to impact the property market in the short to medium term. The spring selling period is also likely to result in an increase in stock levels. With supply already higher than average across some market segments for this time of year, any advertised supply sitting on the market for an extended period may result in further downward pressure on prices.

Commercial Markets

In commercial markets, higher interest rates are designed to slow the economy, which would affect occupier demand for predominantly commercial office property during a time when the market is already having to adapt to changing occupier needs. Following a period of strong rental growth in some segments (predominantly industrial sectors nationally), a weaker economic outlook would reduce prospects for sustained rental growth in some market areas, which would also affect investor sentiment and pricing.

We consider the increase in the cost of debt relative to property yields in addition to softening consumer confidence will lead to a slowing of transaction volumes. We anticipate this slowing of transaction volumes will continue in the short term as investors evaluate financial market risks resulting in more stabilized vendor price expectations and an expected increase in the gap between prime and secondary property yields.

Construction Risk

For both residential and commercial property markets, the sustained surge in construction costs as well as the inherent additional risks in engaging building contractors at this period of the cycle has modified buyer behaviour, with purchasers favouring recently renovated/turn key property over those which require extensive re-development or renovation works.

Whilst construction activity continues to fall, the predictions are that construction costs will ease through next year with higher interest rates and inflation, curtailing demand. This easing of demand should allow manufacturing and supply chains to re-align to ‘normality’, and albeit from a higher base, the easing of demand should see a softening in material prices, with demand-led price premiums predicted to fall in the next 12 months.

Opteon is carefully monitoring the markets and our valuers have been updated on emerging trends. We continue to analyse recent sales activity and transactions across Australia, as well as monitor future economic data to support your property decisions.

Know Your Position – How Can Opteon Help?

Whether in a stable position or at risk, determine your equity position by understanding the value of your property.



Property Owners / Buyers

Whether you are looking to refinance or looking for opportunities in a cooling market over the next 6-12 months with less competition from other buyers, Opteon can assist in good due diligence by providing an independent market valuation prepared by an experienced, local, and Certified Practising Valuer.



If you have clients in financial stress, Opteon can give impartial advice on the market value, suggestions to maximise realisable value, or recommendations on marketing methods or local agent contacts, to help mitigate the circumstances.


Self-Managed Superannuation Fund (SMSF) Properties

If you have a SMSF, as you start to contemplate preparing information for your financial accounts for the 2021-22 financial year, we recommend you obtain a valuation for financial reporting purposes at least every three years. It is also cost effective to update rental and insurance values at the same time. If you haven’t had your SMSF property valued for a few years, auditors and the Australian Tax Office may require a formal valuation, not just an appraisal – your local Opteon valuer can be of service.



It is a difficult time for some builders. If you have building stock on your books, contemplate revaluations to understand your asset/equity position and finance options to support cashflow to finish projects and sell stock on. For building projects in the difficult position of being partly finished, a valuation “as is” and “as if complete” will help make informed decisions about whether the cost to complete makes financial sense or whether other strategies need to be contemplated.


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Our Valuations experts are fully-qualified with in-depth knowledge of the market, supporting customers make informed decisions on their real estate assets.



This material is produced by Opteon Property Group Pty Ltd. It is intended to provide general information in summary form on valuation related topics, current at the time of first publication. The contents do not constitute advice and should not be relied upon as such. Formal advice should be sought in particular matters. Opteon’s valuers are qualified, experienced and certified to provide market value valuations of your property. Opteon does not provide accounting, specialist tax or financial advice. Liability limited by a scheme approved under Professional Standards Legislation.