1 . Falling property prices
If you ’ re considering buying property , you ’ ve probably seen the widely reported news that property prices have dropped in many areas around the country . Property insights provider CoreLogic released data showing houses in some areas in Sydney have dropped in value by up to 25 per cent over the last year and some Melbourne suburbs dropped by nearly 15 per cent . These were the two hardest-hit cities in the property downturn . While this is not great news for homeowners , it can be a great opportunity for people wanting to get into the market . It means homes may be more affordable than they were a year ago . It also means we are moving toward , if not in , a buyers ’ market - compared to last year ’ s seller ’ s market .
2 . Increasing rents
If you ’ ve looked for property to rent recently , you would know competition is high , the prices are up and other applicants are offering anything from higher rent to months upfront in a bid to secure a property . According to a recent report by Domain , Australians are experiencing the longest period of rental price growth on record . Nationally , the annual change to September was 12.8 per cent , with Brisbane experiencing the highest increase at 22 per cent . When you purchase your own home , you become your own landlord . Variable rates for home loans are likely to increase and decrease over time , however rents on properties tend to continue to trend upward . Buying your home to live in helps you to get out of the rising-rate environment .
3 . Projected flattening of interest rates
The cash rate has increased steadily over the last eight months , and with it interest rates on home loans . The RBA has said it is open-minded about how many future rate increases it will make , however economists at the big four banks have made predictions on when it will peak - ranging from 3.1 per cent to 3.85 per cent . They all predict this peak will happen at some stage in 2023 . There are two potential pros for this for people looking to purchase property . Firstly , if we hit the peak in 2023 , they ’ re unlikely to experience the same turbulence homeowners experienced through 2022 with the rapidly rising rates . Secondly , the stress test applied to loan applications ( where lenders test if you could afford to pay your loan if the rate was three per cent higher than it is on the day you apply ) means you should remain within your “ comfort ” range on repayments if economic factors are brought into control as projected .
4 . Higher savings rates
The flip side of the rising cash rate is that the interest rate on savings accounts usually also increases . This is good news for people saving a deposit to purchase property . While we were experiencing the lowest cash rate on record , savers took a big hit where their savings were receiving very little if any interest . Now savings accounts can have interest rates over four per cent ( if the bank ’ s specified conditions are met ), helping give a boost to that deposit . This combined with the decreasing property prices can put buyers in a better position to get onto the ladder .
Andrea McNaughton Managing Director Loan Market
13