Property Market & Interest Rates
March 2023 Update
Whatever happened to January and February! I can’t believe we’re nearly a quarter of the way through 2023.
Attached here is the corelogic monthly housing check, this is filled with some great data on the property market in Australia.
- The Sydney market is showing signs of stabilising from it’s 12 month decline.
- Adelaide, Darwin & Perth have increased in value over the past 12 months, bucking the trend of other major capital cities.
- Median days of properties listed on market has doubled since November 2021.
- Increases in rent have rocketed since Feb 2020, up 10.2% through 2022.
- The monthly CPI indicator suggests that inflation has peaked in Australia. (A main indicator for the RBA on future rate rises).
The RBA lifted interest rates for a 10th month in a row, the cash rate has risen from 0.10% to 3.60% in that time.
For a $500K mortgage, that’s an increase of $1022 per month in repayments.
Some highlights from the RBA statement this month: (https://www.rba.gov.au/media-releases/2023/mr-23-07.html)
- Global inflation remains very high. The outlook for the global economy remains subdued, with below average growth expected this year and next.
- The monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia. Services price inflation remains high, with strong demand for some services over the summer.
- Rents are increasing at the fastest rate in some years, with vacancy rates low in many parts of the country.
- Household consumption growth has slowed due to the tighter financial conditions and the outlook for housing construction has softened. In contrast, the outlook for business investment remains positive, with many businesses operating at a very high level of capacity utilisation.
- The labour market remains very tight, although conditions have eased a little. The unemployment rate remains at close to a 50-year low. Employment fell in January, but this partly reflects changing seasonal patterns in labour hiring. Many firms continue to experience difficulty hiring workers, although some report a recent easing in labour shortages. As economic growth slows, unemployment is expected to increase.
- Wages growth is continuing to pick up in response to the tight labour market and higher inflation.
- The Board’s priority is to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy.
The last part of this article is most notable:
The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.
It seems like the key indicators are starting to settle, inflation it seems has peaked, supply chains are improving in some sectors, household consumption is slowing (rate rises are working to curb demand). However, it seems the RBA are concerned with wage growth and the tight labour market. An article recently published in the financial review predicts a near half chance of a rate rise in April.
- We’ve had the opportunity to review and reduce interest rates for some of our Webb Financial clients. The reduction has ranged from 0.10-0.50% off current interest rates which makes a difference. Please contact me if you’d like a review, we are proactively making contact to offer a review.
- I’m seeing a high level of first home owners looking to enter the market via the first home guarantee scheme https://www.nhfic.gov.au/support-buy-home/first-home-guarantee, with the introduction of the annual property tax this makes owning your first home even more accessible.
- Further, I’m still seeing clients wanting to invest. A tight rental market and increased rent returns, plus a good buyers market can make it a good time to consider investing if it’s affordable.
- I am an advocate of buyers agents when investing, as you can see in the corelogic pack (attached), not all locations (cities, regional centres) are equal. An investment should be considered on financial metrics and a low level of emotional consideration. (unlike purchasing your home).