May 2023 Residential Newsletter

Property prices have now risen in consecutive months

These are interesting times, with interest rates appearing to be close to their peak and housing prices rising again. Here’s what’s making news in finance and property:

• Property prices rising

• RBA to be reformed

• First home buyer update

• Unit rents surging

Australian property prices look to be trending upwards again, judging by the latest data from CoreLogic.

After the national median price fell 9.1% between May 2022 and February 2023, it has since risen in consecutive months – by 0.6% in March and 0.5% in April.

“Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift,” CoreLogic's research director, Tim Lawless, said.

“Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average,” he said.

Mr Lawless said it was notable this housing turnaround was occurring despite interest rates remaining elevated.

“The last time we saw housing values trending higher through a rising interest rate environment was during the mid-to-late 2000s when the mining boom was underway. This period was also characterised by surging net overseas migration that contributed significantly to housing demand,” he said.

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Treasurer reveals plan to reform RBA

The Reserve Bank of Australia (RBA) is set for a shake-up, following a review commissioned by the federal government.

The review made 51 recommendations, including specific measures to create a clearer monetary policy framework and stronger monetary policy decision-making.

Treasurer Jim Chalmers said the government agreed in-principle with all the recommendations and would work with the RBA and parliament to implement them.

Subject to consultations with the opposition, the Treasurer said the government would introduce legislation to:

• Reinforce the independence of the RBA in the operation of monetary policy

• Split the RBA board into two – with one board to oversee monetary policy and the other governance

• Strengthen the RBA’s mandate

• Clarify that Australia’s monetary policy framework will aim for both price stability and full employment

Treasurer Chalmers also said the government would institute a more transparent process for appointing external members to the RBA boards.

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First home buyer activity jumps 15.8% month-on-month

It's too early to say first home buyers are back, but they've certainly made a welcome return to the market, according to the latest data from the Australian Bureau of Statistics.

The number of new owner-occupier first home buyer loan commitments rose 15.8% in March, after reaching a five-year low in February.

That said, first home buyer activity was 21.8% lower than the year before and 50.5% lower than the January 2021 high.

Now that property prices appear to be rising again (see first story in newsletter), it might be wise for first home buyers to enter the market sooner rather than later, before prices rise further. Saving a deposit can be hard, but there are two ways to speed up the process.

• Under the First Home Guarantee, the federal government helps eligible first home buyers purchase a property with just a 5% deposit without having to pay lender’s mortgage insurance. Income and price caps apply.

• First home buyers who have parental support can use a guarantor home loan to enter the market with, potentially, a 0% deposit. Again, conditions apply.

I love helping first home buyers get on the property ladder. Contact me for expert advice.

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Unit prices and rents heading north

Things are looking up for owners of units, whether owner-occupiers or investors.

After the national median unit price fell for 10 consecutive months, it increased in both March (0.6%) and April (0.7%), according to CoreLogic.

CoreLogic economist Kaytlin Ezzy said this could signify “the start of a slow recovery phase, with inflation seemingly moving past its peak and consumer sentiment rising from near-record lows”.

Meanwhile, unit rents are not only surging (up 14.8% over the year to April), they’re growing significantly faster than house rents (8.4%).

“The mismatch between [unit] rental supply and demand has seen capital city rental growth reaccelerate, which will be unwelcome news to many tenants already struggling to find affordable rental accommodation,” Ms Ezzy said.

“While units across each of the capitals and rest-of-state regions still offer a more affordable rental alternative compared to houses, the stronger rental growth seen in the medium to high-density sector, in part due to their relative affordability, has seen the gap narrow.”

I hope you enjoyed my latest newsletter. I’m here to help, so if you need assistance with a new loan or refinancing, please get in touch.

Combatting rising interest rates

Our top 3 tips to offset higher mortgage costs

by Alan Harrosh

Following yesterday's bad news of another rate rise, here is our top 3 tips to saving some money on your existing variable home or investment loan.

1. REVIEW YOUR RATES

Click the link below for us to review your existing variable home or investment loan. We will submit a pricing review to your lender to see if your existing discount can be increased, lowering your rate. It's fast and it's free.

2. SPLIT YOUR LOAN - PART FIXED / PART VARIABLE

Consider splitting your loan into part fixed, part variable. Doing this can provide a hedge against further rate rises and certainty of repayments. It also provides the flexibility and benefits of a variable loan such as 100% offset and the ability to make additional repayments.

There are some compelling fixed rates currently available. 3 year fixed rates are coming up cheapest, starting at circa 5.39% compared to competitive variable rates circa 5.54% (pre June rate rise). 1 year fixed rates are circa 5.59% which is attractive if you are already paying more. As always though, the risk with fixing means you could be trapped in the fixed rate long after rates begin falling. To discuss this further just send me an email or give me a call.

3. REFINANCE YOUR LOAN & CASHBACK

If renegotiating your existing loan doesn't net market competitive rates then it might be time to consider refinancing.

New lending rates are almost always lower than existing rates. The aim is to obtain a lower interest rate but maintain the same remaining loan term so you don't end up paying interest for longer. Some lenders are also offering refinance cashbacks between $3,000 - $5,000; however these are quickly drying up with CBA, Bankwest and NAB already pulling these from market.

If you haven't reviewed your loan for some time, I urge you to get in touch. It doesn't take long for us to review the loan to see what kind of savings might be available.

Towards 2019: what next for the housing market?

The Australian residential housing market has been highly variable this year, and we’ve seen some highlights as well as lowlights. We look ahead at what’s expected for the remainder of 2018 and beyond.

It’s been a tale of mixed fortunes in the nation’s housing market over the past 12 months. There’s been a downward slide in what were previously booming markets, as well as delight over growth in other areas.

Capital cities have mostly continued to soften – particularly Sydney, which has had a tough start to the year – yet some of our regional areas have reaped the rewards as homebuyers look further afield for value.

While houses have felt the pressure, apartment values in some areas have risen.

What’s more, whilst value declines were recorded for the more expensive half of the market, the most affordable end grew in value. It’s an interesting time, so we’ve taken a look at the key trends to be aware of in 2018.

The big winner: regional markets

Over the first quarter of the year, capital city values were down almost 1 per cent compared to a 1.1 per cent lift in regional dwelling values, according to NAB’s April 2018 Australian Housing Market Update.

The combined regional markets have been outperforming the capital cities since October last year, with the strongest annual growth rates recorded in the regions around Melbourne, Sydney and Canberra.

Victoria’s Geelong recorded the highest capital gains in the country over the past 12 months, with dwelling values up 10 per cent, followed by NSW’s Southern Highlands and Shoalhaven region, which rose 9.5 per cent.

The Capital region in south-east NSW including Queanbeyan rose 8.3 per cent in the same period, as did the Newcastle and Lake Macquarie regions.

Driving the reduced demand in the cities is widely acknowledged by commentators nationally as recognition of opportunities in regional areas.

As NAB’s Housing Update team put it in the April Australian Housing Market Update, “it seems buyer demand has rippled away from the capitals… towards areas where housing is more affordable but also jobs, amenity and transport options are reasonably plentiful”.

Apartments gain attention

Interestingly, there has been a demand for units over houses, with unit values now outperforming house values in certain areas.

It’s a subtle difference when you look at the combined capital city figures over the March quarter – while house values are down one per cent, units are down a more moderate 0.7 per cent.

But those differences are more significant if you look at Sydney and Melbourne, where housing affordability pressures are clearer. As the report also shows, Sydney’s unit values are up 1.9 per cent over the past 12 months while house values are down 3.8 per cent.

Despite more positive results, the trend in Melbourne over the last 12 months is similar, with house values only rising 4.9 per cent, compared to the 6.6 per cent climb of units.

However, the trend is less pronounced or even reversed outside of Sydney and Melbourne.

The Brisbane housing market was flat over the first three months of the year, continuing the sedate pattern of a decade that’s seen dwelling values rise at an annual rate of just 0.9 per cent. Over the last 12 months, houses have performed better in value – with a rise of 1.8 per cent compared to a fall of 1.4 per cent for units. This is likely due to concerns of an apartment surplus in the city.

However there are predictions that this situation soon change, with unit construction having peaked in 2016. “Population growth is ramping up which will help support an improvement in the unit market’s performance,” according to NAB’s April update.

State by state: a breakdown

Perth is showing signs of improving conditions – a turnaround for a market that peaked in June 2014 and has since seen dwelling values fall 10.8 per cent. The median dwelling value here is the lowest of the four largest capital cities. Dwelling values posted a rise in March (up 0.3 per cent) but units continued to fall (down 2.2 per cent over the quarter).

Hobart is the star performer and it’s a trend that’s expected to continue this year. Dwelling values were 1.7 per cent higher in March to be 13 per cent higher for the year. Adding more fuel to the fire is the plummeting listing numbers in the market – down 36 per cent compared to a year ago – leading to rapid sales. “With low stock levels and high demand, Hobart is truly a sellers’ market” according to the update.

In Adelaide, growth has been flat but dwelling values are up 1.7 per cent on 12 months ago and there are some positive signs. “Jobs growth has been ramping up across SA, which should help support a turnaround in migration that could buoy housing demand” the update predicts.

What’s next?

While there’s unlikely to be a major upturn in Sydney and Melbourne any time soon, signs point to a reasonably soft landing and stabilisation in other markets, according to the Housing Market Update.

Property experts are predicting further house price falls in NSW and Victoria but are more optimistic about Western Australia and Queensland.

NAB Chief Economist Alan Oster says stronger performances in some markets won’t make up for the decline in Sydney and Melbourne, predicting little improvement in the overall house price for the year.

“Strong performance in Tasmania and to a lesser extent in regional areas, along with higher confidence in the West and Queensland, won’t offset the aggregate effects of lower prices in Sydney and Melbourne,” he says.