With the beautiful spring weather upon us, will we see this translate to growth in the property market?
Last month we spoke about the recent market changes starting to flow through into the property market – the boost in post-election confidence, RBA rate changes, and lastly change in APRA assessment guidelines.
We predicted that following modest growth in the Sydney market in June +0.1% and July +0.2% that the market would grow strongly in August with the APRA assessment guidelines flowing through. And they did, with Sydney closing out +1.6% higher for the month.
Melbourne at +1.4% and Brisbane +0.2% were also positive for the month, which was enough to take the national index to +0.8%. For Sydney in particular inventory remains particularly tight, so it is expected that this will keep upward pressure on prices which I know will be frustrating for many buyers.
In lending, stronger confidence has meant significantly higher volumes of loan applications. Each lender is in a different position as to their processing timelines, current offers and resource, but many are struggling to cope with processing this higher volume. One lender who was previously processing pre-approval applications within 48 hours are now at 16 business days for approval so it is important to consider this in time bound purchase scenarios.
The APRA assessment rate changes have been coupled with some major HEM (Household Expenditure Measure) revisions from most lenders. This is the minimum allocation of monthly living expenses that most lenders use. For many who actually have lower levels of expenses than HEM, these are ignored and the higher HEM is taken. This may mean that the recent revision in guidelines will not free up as much borrowing capacity as initially indicated, and for some without restructuring existing debt they may go backward on borrowing capacity.
Lastly there is continued talk of the Reserve Bank of Australia (RBA) dropping the central bank cash rate further in November but possibly as early as October after deciding to leave them on hold at last week’s RBA meeting. We’ve seen further reductions in fixed rate mortgages, with one major lender offering 5 year fixed owner occupier rates as low as 2.94%, which clearly indicates that their outlook is for rates to go lower, and stay low for quite some time.
If you or someone you know needs help navigating the current environment, don’t hesitate to get in contact!
Please note – the above is opinion only and should not be taken as financial advice.
Spring has come to Watson’s Bay!