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Property market update – October 2022


RBA points to new data that shows a reduction in the pace of inflation

Deputy Governor of the RBA, Michele Bullock has shared how the RBA and RBA Board come to decisions on monetary policy. Michele highlights that ‘an increasing availability of very timely information that has supplemented the traditional data’ has been key in recent decision-making. In Graph 2 below, you can see the CBA wage indicator has provided a more timely view of wage growth. In addition, Graph 3 displays a reference to the now monthly inflation indicator from the Australian Bureau of Statistics, which is showing a very welcome reduction in the pace of inflation.

RBA: Property price predictions

Internal research by the RBA has found property prices could fall as much as 20 percent from their peak by the end of 2024. In a bid to quell inflation, interest rates have been rising at a rapid pace, which is having a direct impact on the value of the largest asset held by most Australians, households.

Sydney prices as measured by Corelogic are down 9% since their January peak while Melbourne prices have fallen 5.6% since February. In one document, an RBA economist says the fall in inflation-adjusted terms could be the largest to hit the Australian property market since the early 1980s.

Canstar finance commentator Steve Mickenbecker said predictions of steep price falls would weigh on the market, particularly among first-time buyers who may hold out waiting for a cheaper property.

The Australian mortgage market has changed drastically in the last 2 years

In the last two years, the Australian mortgage market has changed significantly. In March 2020, the beginning of the pandemic, 13% of new and refinanced loans were fixed, while 87% were variable. 

As cash rates and home loans plummeted, an increase in the population began fixing their loans to lock in lower rates. By July 2021, 46% of new and refinanced loans were fixed, and 54% were variable.

The markets then started pricing in future rate rises and banks responded by raising their fixed rates. As a result, fewer and fewer borrowers chose to fix

By August 2022, banks had responded to the rate rises and started raising their fixed rates. As a result, only 4% of new and refinanced loans were fixed, compared to 96% variable.

Rental markets: Tightest on record

Rental markets around the nation remain tight, however, the pace of rental price growth has eased slightly. As of early October, the total supply of advertised rental stock is 35.4% below the 5-year national average.

National dwelling rents increased 0.6% in September and 2.3% over the September quarter (down from 2.9% in the June quarter). National vacancy rates tightened from 1.3% to 1.1% in September, the lowest national vacancy rate on record. Sydney rental prices increased  2.9% over the September quarter alone.

The experts are looking for a bottom-in Sydney property in the first quarter of 2023. If you are a buyer, you want to be in before the bottom eventuates. If you would like to review your options and have your capacity assessed, call our team to put a plan in place.
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