In particular we focus on getting the loan structure right the first time, choosing which lenders to use in the right order (yes this is important) and finally getting our clients the best deal possible.
Interest rates and the general property market from here
Marty McDonald
Interest rates and the general property market from here
With the RBA increasing the cash rate by 0.25% in October (rather than 0.50%) we are hopeful that the run of oversized increases is over. We are now expecting a 0.25% increase in November and 0.25% in December and then possibly one more increase in early 2023. That would take a competitive home loan to around 4.95% pa.
The Sydney property market has taken the slowing of rate increases as a positive signal with clearance rates last weekend the strongest in last 5-6 months despite the horrible weather.
We still think general prices will decrease from here but most of the decrease is now “baked in” to price expectations. Officially values are down 9-10% from their early 2022 peak but as always there is a lag in data so on the ground decreases are probably already 12% or so on average. We are not expecting more than say 15% -20% decrease from peak to trough. So, we think we are pretty close to the bottom.
Generally peoples’ borrowing capacities will have decreased by around 25% if the above rate increases play out. We would expect that this would broadly impact property prices by around 15%- 20%. Not everyone borrows their maximum amount and not everyone needs a loan after all.
We also think there is floor under prices due to:
- Limited amounts of new stock hitting the market with listings down 13% year on year in Sydney
- Rents are up 25-30% over the last 12 months
- Building costs / replacement costs so high
About the Author: Marty McDonald is principal of mortgage broker “Mortgage
Experts”. Marty specialises in assisting active property investors with loan structuring advice and
implementation as well as helping credit worthy borrowers with slightly outside the box income and employment
situations. Find Marty on
Facebook and
LinkedIn.
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