For a while I’ve been saying that correlation does not equal causation emphasising that interest rates are only one part of the property price equation. The end of June financial year has marked the 4th consecutive month of house value increases since they found a floor in February of this year. Since then, housing values have increased nationally by 3.4%. Sydney has led the charge with an upswing of 1.7% over the course of June, taking the cumulative rise since the January/ February trough to an impressive 6.7%. Despite this boon in housing values, driven primarily through lower supply, the overall pace of growth has slowed. This shortage in supply has been fuelled by a reluctance from owners in putting their property on the market in the belief that their wish price might be compromised. Ironically, in most cases this has resulted in the opposite with net capital city listings overall being nearly 10% below the previous five year average and “total inventory levels are more than a quarter below average” according to CoreLogic. So with this constrained supply the effects of interest rate rises have not dampened buyer enthusiasm as much as expected. This is playing out in the sales results we see locally, where those homes with any number of appealing points of difference, i.e. popular floorplans; generous block sizes; modern finishes; potential to add value; proximity to infrastructure… are continuing to garner strong buyer interest and often achieving results beyond expectations. We have seen the number of short-sellers (those buyers that purchased over the course of the last 2 years for instance) rising nationally. Many of these short-sellers have typically involved buyers that have become sensitive to the string of rate hikes and are trying to offload their homes to avoid the mounting pressures from an increase in mortgage repayments. Despite the fact that rental vacancies continue to be at record lows and are attracting strong rents, clearly the rise in mortgage repayments have started to bite amongst some investors who are opting to streamline their expenses. Keep in mind the higher rents still have not offset the steep rise in mortgage repayments for investors. In fact during the month of May approximately 36% of all listings were rental/investor stock. However, according to CoreLogic net overseas migration is expected to reach 400,000 this financial year, which is almost 27% above the previous record high recorded in 2008. Although housing values continue to record a broad-based upswing, the pace of growth across most capitals eased in June. “A slowdown in the pace of capital gains could be a reflection of a change in sentiment as interest rate expectations revise higher,” Mr Lawless from CoreLogic said. “Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply.” If you’re looking to sell your property, now could be the sweet spot you’re looking for as there’s an under-supply of good property on the market. As with many things, timing is everything. *Disclaimer: Please note, this report is strictly meant to be of an informative nature and does not constitute investment advice. Market Update 0411 330 208 jholvander@meridienrealty.com.au 2
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