Welcome to our July Newsletter
With buyers increasingly taking their time to purchase and becoming more selective, properties are no longer being snapped up at lightning speed in many markets. Buyers are negotiating harder and walking away if the asking price is not in line with current market expectations.
Recent tax reforms in the Federal Budget have also caused many investors to reassess their purchasing plans and strategies. Sellers are having to adjust their price expectations and adapt to the changing conditions, too.
If you’re looking to buy a home or investment property, talk to us about your finance options. We’ll explain your borrowing power and organise pre-approval.
With economists and banks not aligned on where the market is heading, the Reserve Bank of Australia (RBA) has decided to leave the cash rate on hold at 4.35% at its June meeting. This follows three consecutive rate hikes so far this year.
While headline inflation has eased, underlying inflation remains elevated.
Annual inflation dropped to 4% in the 12 months to May, largely driven by a decline in fuel prices, which were nearly 12% lower in May.
In contrast, underlying inflation remained more persistent, with the RBA’s preferred trimmed mean measure increasing to 3.6%, up from 3.4% in April.
Treasurer Jim Chalmers welcomed the lower headline inflation rate, but said his government was not “complacent” about the risks.
“We know that there are still inflationary pressures in our economy. But these numbers today are much better than the market expected, much better than forecast, and that’s obviously a very good thing,” the treasurer said.
The RBA said the three rate hikes appeared to be having “broadly the expected effect”, as international economic pressures ease.
“It would take some time to assess the ultimate impact on the economy of the tightening in monetary policy since February but, at this stage, it appeared to be having broadly the expected effect,” the last RBA Board meeting minutes said.
“Housing demand had eased, which also reflected the broader economic environment and recently proposed tax changes.”
The next cash rate decision will be on August 11. Economists and major lenders are divided on the likely path for the upcoming interest rates, as global and domestic factors continue to shape an increasingly unpredictable economic environment.
The latest housing market figures show the downturn is deepening. National dwelling values dropped 0.4% in June according to Cotality, marking the largest month-on-month fall since December 2022.
Sydney’s prices fell 1.2%, Melbourne’s dropped 1%, and Canberra’s were down 0.6%. Adelaide’s prices remained flat, while Brisbane saw modest gains. Hobart and Perth’s values increased 0.6% and 0.7% respectively.
The June quarter marked a significant shift in Australia’s housing dynamic. Capital city home values fell by 1.3% over the quarter, with Sydney leading the pace of decline at -3.2%. Melbourne values were down 2.6%, and ACT values dropped 1.3%.
“Weaker conditions through the second quarter of the year are attributable to an array of downside factors,” said Cotality research director Tim Lawless.
“Even before interest rates rose by seventy-five basis points, we were seeing affordability hurdles weighing on buyer demand.
“Higher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the Federal Budget are all contributing to weaker housing conditions.”
The cooling market is further evident in falling auction clearance rates, home sales estimates and listing volumes.
“Such low clearance rates indicate a mismatch between buyer and seller pricing expectations. Buyers now have more stock to choose from and less urgency in their decision-making,” Mr Lawless said.
“Higher listings aren’t due to a pick-up in the flow of new listings; it’s a symptom of less demand in the market, which has led to an accumulation of advertised stock.”
Meanwhile, regional markets continue to outperform their capital city counterparts, increasing 1.1% over the quarter, and 0.3% in June.
| All dwellings | Auctions | Clearance Rate | Private Sale | Monthly home values change |
|---|---|---|---|---|
| VIC | 783 | 47% | 1286 | ▼ – 1.0% |
| NSW | 875 | 39% | 1540 | ▼ – 1.2% |
| ACT | 60 | 43% | 101 | ▼ – 0.6% |
| QLD | 224 | 28% | 899 | ▲ 0.3% |
| WA | 19 | 21% | 514 | ▲ 0.7% |
| NT | 7 | 57% | 17 | ▲ 1.4% |
| TAS | 1 | 100% | 148 | ▲ 0.6% |
| SA | 135 | 50% | 276 | 0% |
Home loan pre-approval typically remains valid for around 90 days, so if you’re considering a property purchase in the coming months, it could be worth discussing your options sooner rather than later. Your broker can help you understand your borrowing capacity, explain the pre-approval process and discuss the factors that may be relevant to your circumstances.
