Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
A short segment where I answer some of the top questions from my inbox relating to the current property dynamics in Australia.
Go to the Walk The World Universe at https://walktheworld.com.au/
The logic I hear all the time is the RBA won’t let home prices fall too far because of the financial stability risk consequences. But that view might be plain wrong.
First the RBA has lifted rates by 2.25 percentage points since May, and markets expect the cash rate to reach 3.3 per cent by the end of the year, before peaking at 3.9 per cent in April next year. RBA governor Philip Lowe said last week there was a “narrow path to a soft landing” for the Australian economy, which would be difficult to stay on if global economic conditions deteriorated.
And reflect on this. Within a 24-hour period this week, there will be 16 central bank decisions including the US, UK, Japan, Switzerland, Norway and Taiwan. Cumulatively, we could see over 500 bps in rate hikes across the globe this week.
In addition, Westpac came out yesterday with a revised forecast for the RBA Cash Rate, saying “We now expect the Reserve Bank Board to raise the cash rate by 50 basis points in October for a terminal rate of 3.6% by February (revised up from 3.35%)”. It seems the RBA is giving the green light to home price falls. Because if prices fall you would need a smaller mortgage (even if the interest rates were higher). Let that sink in.
Those who are arguing the RBA won’t be prepared to let home prices fall very far, take note!
Go to the Walk The World Universe at https://walktheworld.com.au/ Today’s post is brought to you by Ribbon Property Consultants.
My Monday chat with Edwin, which covers the latest numbers of property listings in Sydney, and our discussion is packed with insights about the market, and potential future trajectory. Go to the Walk The World Universe at https://walktheworld.com.au/
My latest chat with Edwin as we discuss politicians and their property portfolios, as first time buyers feel the pressure, and mortgage prisoners are a things. We also discuss some of the strategies to make sure agents are working for you.
https://www.ribbonproperty.com.au/
Go to the Walk The World Universe at https://walktheworld.com.au/
My latest Monday evening chat with our property insider Edwin Almeida. We look at the latest from China, consider the rise in chickens at Edwin’s place, and reflect on the resignation of a Building Reform champion. Plus the latest on the numbers, and a discussion on land banking. And you can play spot the pussy cat… somewhere through the show. https://www.ribbonproperty.com.au/ Go to the Walk The World Universe at https://walktheworld.com.au/
We look at the latest data as forecasters indicate a rise in mortgage rates as the RBA tackles inflation, leads to reduced lending, and risks of stagflation or recession.
Today’s post is brought to you by Ribbon Property Consultants. If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you. Buying property, is both challenging and adversarial. The vendor has a professional on their side. Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make. Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest. Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
Following the Reserve Bank’s double rate hike, big banks have lifted all their variable mortgage rates by 0.5 percentage points. As a result, the average variable borrower will have seen their rate rise by 1.25 percentage points since the start of May. That means someone with a $500,000 mortgage, with 25 years remaining, will see their repayments increase by an estimated $333 in total across the three hikes, RateCity.com.au said. While variable rate borrowers with loans with CBA, NAB, and ANZ will be charged a higher interest rate starting today, it will take weeks for their monthly repayments to rise. In fact, the increase in monthly repayments many of these customers are currently seeing resulted from the May hike. This is because banks typically give 20 to 32 days’ notice before lifting their monthly repayments, despite charging their customers the higher rate from the effective date. Even then, the increase to their monthly repayment might not take effect for another few weeks, depending on when they are due. UBS has predicted interest rates will peak at around 3.5 per cent in March next year, but said this will still hit the housing market hard. “We still think market pricing of about 3.5 per cent – if delivered – would likely crash housing, and see the economy nearing a recession,” George Tharenou, chief economist at UBS, told The Australian. If interest rates were to rise to 3.5 per cent it would likely see the average variable mortgage rate hit a whopping 6 per cent and could plunge the economy into recession, according to the investment bank. “Interest payments across the economy next year for the household sector will close to double from now,” Mr Tharenou said. “We have never seen such a sharp increase in repayments. That really crushes household cashflow next year when you have cost-of-living issues.” Go to the Walk The World Universe at https://walktheworld.com.au/ Today’s post is brought to you by Ribbon Property Consultants. If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you. Buying property, is both challenging and adversarial. The vendor has a professional on their side. Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make. Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest. Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
In recent years we have seen a swathe of “initiatives” from state and federal governments with the aim to encouraging and helping more first-time buyers into the housing market. The previous Government claimed they had helped “hundreds of thousands” into the property market.
The latest ABS statistics shows that the number of First Time Buyers is falling again – and the part peaks map directly onto Government “stimulus” measures.
The latest is the Albanese Government release of 40,000 new places under the Federal Government’s Home Guarantee Scheme, which will enable eligible first home buyers to purchase a property with a deposit of as little as 2% or 5%.
This as a time when the Reserve Bank of Australia is aggressively increasing rates and house prices are expected to plunge by between 10% and 20%, depending on the forecast. What could possibly go wrong?
In fact, the evidence suggest that these schemes are ineffective. Indeed, the long-term trends in terms of home ownership shows that across Australia, a smaller proportion of people own their own home, and those that do have bigger mortgages for longer. The latest Census data, which is still in the process of being released continues to confirm this trend.
Home ownership rates in Australia have declined over several decades, and the likelihood of attaining home ownership by age 30 has fallen substantially. Go back two decades and the average age of a first time buyer was 27 year, today its 34 years and rising based on my surveys. In addition, especially in Sydney, Melbourne and Perth, first home buyers (FHBs) are now buying fewer houses and more units, and evidence shows that more are receiving parental assistance.
Also while mortgage repayment affordability stress has been cushioned by falling interest rates until 2022, mortgage deposit requirements have risen with prices and become an increasingly serious constraint—far more so in Sydney and Melbourne than elsewhere.
I have long argued that this First Home Owner grants are bribes which distort the market, lift prices and are more designed to assist the construction sector. In other words, First Time Buyer Grants are a con.
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This is an edited version of my live discussion about the current state of the markets with Chris Bates from Wealthful, on the day the RBA will lift rates again.
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In our latest Monday Rant we look at the latest from our Wee-Chatters, the latest numbers, and “innovative” property solutions, as rate rise and pressure on households build.
https://www.ribbonproperty.com.au/
Go to the Walk The World Universe at https://walktheworld.com.au/
