The housing market is in a state of flux, with a recent report revealing that the type of home getting 'hit harder' as house values fall. The focus is on the upper quartile, or family home market, which has seen a four percent decline in both Melbourne and Sydney over the three months to the end of May. This is in stark contrast to the smaller capitals, which have continued to soar, with Perth seeing an almost four percent gain in the top quartile and over six percent in its bottom quarter. The Reserve Bank's decision to keep the cash rate steady at 4.35 percent, following three consecutive rate rises this year, has added to the cost of mortgage repayments, making it more challenging for buyers to enter the market. The federal government's five percent deposit scheme is helping to keep competition in the bottom quartile, but first home buyers are still sensitive to further rate hikes. The impact of these factors is forcing buyers who were previously looking to the middle band to bid on cheaper homes, increasing competition. Investors, too, are being affected by the announced policy changes around the capital gains discount and negative gearing, leading to a shift in their focus. The top quartile, which has a higher buy-in cost, is seeing falls, with the federal government's policies limiting demand. The Reserve Bank's actions and the federal government's policies are having a significant impact on the market, with the top quartile feeling the brunt of the downturn. The lower tiers are outperforming, but there are early signs that a correction will flow through to the wider market. The government's proposed changes to capital gains tax and grandfathering of negative gearing will slow investment and disincentivize those with existing homes from selling. Sydney-based buyer's agent Michelle May has noticed investors pulling back, with more properties being passed in and taken off the market. She advises homeowners, especially those who've bought recently, not to follow the ups and downs of property values too closely, as the impact at the bottom end of the market is obscured by government incentives. The report highlights the contrast between the larger capitals and the smaller capitals, with the former driving growth and the latter seeing a loss of momentum. The housing market is in a state of flux, and the future is uncertain, with the market in a state of flux and the future uncertain. The report highlights the importance of staying informed and making informed decisions, as the market is in a state of flux and the future is uncertain.
