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Property market update – August 2022

AUGUST UPDATE: CASH RATE | 1.85%

House Price Cycles

Australian property prices might be falling as interest rate rises start to bite, however, such was the surge in values over the recent boom, prices would need to drop by 25% to a national median of $800,000 to sink to pre-pandemic levels, according to Domain. Domain’s research team assessed the possibility of that happening as ‘unlikely’ after analysing almost three decades of data (unlikely, but not impossible). 

This analysis found that in previous property booms, house prices on average rose 32.7% in an upswing that lasted, on average, for 33 months. Conversely, in an average downturn, house prices dropped just 3% over nine months… Read more 

Spring Auction Season Starts Early

The spring auction season has started early with 2018 homes taken to auction last week, up 10.8% from the week prior and 3% higher than a year ago. With a rise in capital city auction rates, we have seen a dip in preliminary clearance as more than 2,000 homes go to auction for the first time in nine weeks.

Increasing rates affecting borrowing capacity

The RBA has increased the cash rate from 0.10% to 1.85% in the last 3 months, with another 0.50-1% expected before the end of 2022. With increased rates comes an increase in the assessment rate, which is applied to new and existing loans to determine an applicant’s ability to meet repayments. The assessment rate is calculated by taking the ‘actual rate’ plus a 3% buffer. So, as rates rise, your borrowing capacity is being negatively impacted.

With borrowing capacities continuing to tighten, we will see a further decline in property prices. At the moment, we are advising our clients to ‘preserve’ their borrowing capacity by securing a pre-approval as soon as possible, as your assessment rate will be based on the current rate, which is then valid for 3 months once you are pre-approved. The same will apply for those refinancing, you can apply for a valuation to at least protect yourself for the next 3 months.

Get in touch if you would like to discuss your options further.  

Azura broker Oliver Studdy just saved a new client over $50k in interest over the remaining life of their loan by negotiating their rate from 3.89% to 3.69%. What might seem like a small change in rate can end up saving you over $50k in interest, while also paying off the loan 14 months earlier. The added bonus is a $4k refinance cash rebate paid by the lender. 
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