If you chose to look below the hood, you can see some changing dynamics across the property market which may indicate the recent rises in some areas are easing, to the point where the boss of the country’s biggest real estate group has cautioned that vendors may need to rein in their price expectations this spring, after property price growth eased in July amid concerns of another interest rate rise.
CoreLogic’s Daily Home Value Index shows capital city house prices are up 0.4 per cent over the first 27 days of July, compared with growth of 0.7 per cent in June. As the AFR reported, “Vendors need to be careful regarding price growth expectations,” Ray White Group managing director Dan White said.
Another factor we are seeing playing out is the number of investment properties coming onto the market a feature we noted first in Melbourne where rules on investment property were tightened by the state government.
There net investment yields ( that’s the costs to service the property relative to the rental received) is negative for more than half of properties. Trouble is, many of these properties are also lemons, given they often need more than just a bit of TLC, given many have poor wiring, leaks, asbestos and worse.
Now, NSW Premier, who has been talking about making property in Sydney more affordable, announced the introduction of a ban on no-reason evictions, and an extension of mandatory notice periods to 90 days from 60 days. In other words, owners who use legally permitted grounds for eviction – including if they want to live in their own homes – will have to give three months’ notice. In these cases, their renters can walk out, at any time, without penalty. The NSW changes are slated to start early next year.
It already looks like some property investors are leaving the field, thus reducing the supply of rental property. True a first time buyer might step up, but lending standards at higher rates make borrowing capacity an issue. And the risk I see playing out is that well meaning first time buyers will be buying lemons, alongside some ill-informed property investors who still weirdly believe property only ever goes up in value. Just look across the ditch for a dose of reality, as I highlighted recently. There, thanks to slower migration and high interest rates, prices are nose-diving.
Will we see a similar scenario in Australia, or will the Government play another card to keep prices buoyant, or APRA reducing lending buffers. Frankly on both counts its likely, but remember folks, a lemon remains a lemon, so in the current environment buy with great care, and prepare for the cracks to swallow up potential prices rises ahead.
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