Record low mortgage rates, and an expectation interest rates will remain low for an extended period of time, have played a central role in stoking Australia’s economic recovery and rebound in housing markets.
Reduced interest rate.
Australians are currently experiencing record low interest rates. Yet we are still seeing many of our clients with prehistoric mortgage products paying ridiculous amounts of interest.
A 1% reduction on a $400,000 home loan could save you as much as $4,000 a year in interest repayments.
Please contact us and we’ll have a licensed Mortgage Consultant from our Finance partners act on your behalf.
Refinancing with a different lender.
On top of the money you could save with a reduced interest rate, many lenders are also offering financial incentives to encourage people to ‘jump ship’. In some instances, as much as $4,000. When combined with the interest in savings, that’s a whopping $8,000 back in your pocket in the first 12 months.
Many of our clients who are electing to grow their investment portfolio are finding that the savings in refinancing alone cover the costs of owning an additional investment property.
Although the Australian economic recovery has beaten forecasts and appears to be navigating the exit of fiscal support without much of a hitch so far, the cash rate and short-term mortgage rates are likely to remain at their record lows for an extended period of time. This outlook for persistently low rates is due to an expectation that labour markets won’t tighten sufficiently enough to increase wages growth to a level that supports inflation moving back to the target range of 2-3% until at least 2024.
The annual change in headline inflation was tracking at just 1.1% in March and wages growth was only 1.5% over the year to March.
With Australian housing values moving through an eighth consecutive month of growth, reaching new record highs each month in 2021, the RBA is likely to be monitoring housing market trends closely, or more importantly, the lending behaviours that support market activity. The pace of house price appreciation has slowed a little since growth rates hit a 32-year high in March, but with national home values rising 2.2% in May, the pace of capital gains remains unsustainably high.
In a positive sense, the rapid appreciation in housing values has increased household wealth and has likely been a key contributor to improved spending behaviour that has supported the economic recovery.
However, the recent increase in investor lending and potential for higher household debt could be a source of growing concern, as borrowers stretch their budgets to access the housing market.
In March, the value of investor home lending increased at the fastest rate since July 2003. Investors remain under-represented in the market, comprising approximately 26% of mortgage demand, however if investor activity continues to grow at this pace and first home buyer activity continues to wind down, this segment of the market could quickly rise to above average levels.
Melbourne house prices are climbing at almost $800 a day with no sign the markets are about to cool any time soon as the economy gathers speed and the Reserve Bank remains committed to record-low interest rates for years to come.
Melbourne’s median house value climbed by 2.2 per cent through the month to reach $908,000, growing by $21,500 a month or $5375 a week since the start of the year.
Melbourne’s median house price is still a way off Sydney with is $1.2 million median.
Housing values are now at new record highs having increased 5.5 per cent in the last quarter and 16 per cent over the year.
However, Melbourne property values have only just reached their pre-pandemic levels and are about to create new peaks, meaning they will only now reach the previous 2017 peak levels.
Despite this Melbourne now has 119 suburbs with a median house price of $1 million or more—up from 98 a year ago.
The higher end grew by 6.5 per cent, compared with 3.5 per cent at the bottom end.
Demand for units in Melbourne’s outer suburbs has also recovered, jumping 8 per cent over the 12 months to March 31.
“[Elsewhere] the combination of improving economic conditions and low interest rates is continuing to support consumer confidence which, in turn has created persistently strong demand for housing.
“At the same time advertised supply remains well below average … this imbalance between demand and supply is continuing to create urgency among buyers, contributing to the upwards pressure on housing prices.”
“The fundamentals of still ultra-low mortgage rates, ongoing government incentives with Home-Builder ended but first-home loan deposit schemes expanded, economic recovery, the strong jobs market and FOMO [fear of missing out] point to further home price increases ahead.”
“Buyers are getting more bullish about capital cities again. I think cities are becoming more revitalised again.
Westpac is expecting Melbourne dwelling values to rise 10 per cent in 2021 and 2022, with the market moving into a sustained boom.
ANZ recently said it expects Melbourne’s house prices to lift by of 16 per cent over the course of the year.
Beyond Melbourne’s CBD, renters had the most properties to choose from in Stonnington East, Whitehorse West, Stonnington West, Boroondara, Glen Eira and Monash.
But it is a very different story on the city fringes—with less than 1 per cent vacancy rates in the Mornington Peninsula, Yarra Ranges, Cardinia, Nillumbik, Macedon Ranges and Maroondah.In the city’s south-east, very few properties are available for rent, with less than 1 per cent vacancy rates in Casey North, Casey South, Frankston and Sunbury.
“Suburban vacancy rates continue to fall and that is now encompassing inner-suburban regions,”
Louis Christoper, SQM Research managing director
During April 2021, approximately $31 billion was lent for the purchase of property in Australia. This was up from $30 billion in the previous month and marks a record high for the series.
First home buyers finance comprised 21.5 per cent of total borrowings for the purchase of property during April, marking the fifth month of consecutive decline in first home buyer share of the value of borrowing.
So far, the COVID-19 downturn has had a dramatic impact on agent activity and listings volumes in residential real estate. But the value of dwellings has been relatively resilient.
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