Is Now The Best Time To Buy?
Interest rates will definitely rise again in the coming months, but there’s more of a case building for this downward cycle in property prices to only last until the middle of next year as rates then go the other way, down. Even though borrowing is already tight and will become more expensive, rising rents and a longer term property focus, just might be providing for some good buying conditions.
On another note, as you may know, we’ve tacked the City2Surf, dedicating our challenge to the Royal Flying Doctor Service. Well done to all the runners this year who participated in the fun event. If you can help us, help those, who live a little further away, we would love you to support our cause before it closes. A huge thanks to those who have contributed to our charitable cause already – we appreciate you.
Rent values climbing
According to data from Corelogic, rent values climbed 0.9 percent in the month of July. That’s six consecutive months now, that growth in rent values has been higher than growth in home values. Sydney rents are now 10 percent higher over the year to July and Australian rents overall, are 9.8 percent higher.
The most significant rent increases were seen in Sydney’s Inner West, North Sydney and Hornsby. Domain reported the median weekly rental is expected to continue to increase this year.
Even though higher interest rates off the back of inflation, are setting a gloomy scene for buyers at the moment, this is only at the moment. We explored this current economic climate in last month’s blog, Inflation and rate increases to end next year? And now, this notion is being further examined by our leading industry experts.
Shane Oliver, AMP’s chief economist, just said, “We’ll probably see the worst of the price declines later this year or early next year, and for values to bottom out probably around the September quarter next year."
“So price falls would be deeper, but we may get to the bottom faster. I was originally thinking the top to bottom falls could drag out into 2024, but it now looks like it could be as short as 12 months.”
Prices declining fast
In the 3 months to July, this momentary fall is well and truly being displayed, national home values fell by -2.0 percent.
If we look at Corelogic’s rolling 28-day change in daily home values index, in the graph below, we see an interesting trend precisely from the time interest rate rises commenced.
At the start of the 2022 calendar year, home values and growth had already plateaued, but when the RBA started increasing rates, you can see a drop accelerating.
This drop is definitely associated with rising interest rates and the detrimental impacts on borrowing capacities, let alone the inflationary pressures, all combining to put a damper on the property buying mood for some but will this only last a short while?
Corelogic’s Head of Research Tim Lawless said recently, “Considering higher interest rates have flowed through to weaker housing market conditions very quickly, we could see the reverse once rates start to fall.”
Which means that if the economy does slow down, or react as fast as it should in response to rising interest rates, as the property market is at the minute, then the RBA’s work will be done and they may be able to let rates cool for a while. With a bit of luck, to then fall. And if they do fall, then this downturn could be over quickly.
Tim Lawless also said, “rising rents could attract more investors into the market, which may provide a bit of a burst once interest rates top out and start to fall again”.
Final thoughts
Even though there’s the likelihood of sharper property price falls still to come in the short term, and tougher lending conditions, a long term focus, with rising rents and a bit of luck from wage increases or revenue, could mean that a savvy investor or purchaser could time a purchase really well. It depends to a large extent on the trajectory of interest rates of course and the economy but more and more experts are saying similar things. That it will most likely be the middle of next year, when housing markets find a floor and potentially record a subtle rise as interest rates reduce and our lenders pass on these rate cuts when the time comes.
We've worked very hard to create long-lasting, fostered relationships with all the 30 plus lenders on our panel, to ensure all our borrowers here at Black & White Finance are on the best terms available. Our finance strategies now more so than ever, need to be smart and in our best interests, to tackle this inflationary economic landscape.
If you want to know more about the different rates, terms, or bank specials on offer at the moment or just have a general question, please send a note to peter@blackandwhitefinance.com.au or click the start today button a little lower. With the help of our amazing Mortgage Broker Sydney – Black and White Finance team, we will be able to support you.
Reach out to us today
0448 890 186
or
Feedback
We’d love to hear what you think about our content or how we could improve to make your experience better. Please send a note to peter@blackandwhitefinance.com.au to let us know your thoughts.