How’s The Market? RBA Rates Held Again, Property Prices Continue To Rise, Vacancy Rates Hold
In This Week’s How's The Market | Edition 63
How’s The Market? RBA Holds Rates Again, Property Prices Continue To Rise, Vacancy Rates Hold
A Gem In Glen Iris
Minimum Rental Standards Criticised
How’s The Market? RBA Rates Held Again, Property Prices Continue To Rise, Vacancy Rates Hold
As you may know, the RBA has now officially held the cash rate on pause again for their September meeting which means that the analyst were right in their predictions. Going into the meeting, the ASX Rate Indicator calculation estimated an 86% likelihood of a pause with a 14% expectation of rates dropping to 3.85%.
So interestingly, this was also the last meeting with Phillip Lowe as the Govenor of the RBA with him finishing a 7-year term.
I wanted to jump into a bit of a breakdown as to what the RBA has actually stated following this month's meeting as well as breaking down what the banks economists' crystal ball might be saying.
Breaking Down RBA Meeting Minutes
The RBA made a comment on the fact that interest rates have risen already by 4% and the higher interest rates are working to establish a more sustainable balance between supply and demand. They know that it can take many months for the effects to be felt and as inflation is coming down faster than expected they are choosing to hold steady to provide further time to assess the impact of the increase in interest rates to date.
They noted that inflation is past its peak with the CPI indicator dropping again in July, however, while goods price inflation has eased, the prices of many services are rising briskly. Rent inflation is also elevated.
Importantly they’ve noted that inflation is on track to reach their goldilocks zones of between 2 - 3% by late 2025.
In the meantime, they’re going to keep an eye on inflation and global events to make sure there are no changes that could impact our inflation trajectory.
Specifically, they’ve stated that globally, there is increased uncertainty around the outlook for the Chinese economy due to ongoing stresses in the property market.
As the Chinese economy is beginning to slow, the risk is that key sectors in the Australian economy could also slow which helps the argument to continue to leave rates on pause.
Does this mean we are definitely at the top of the interest rate cycle? Not necessarily.
The board ended their statement with the continued message stating some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.
What The Major Banks Predict For Interest Rates
Three of the four major banks believe we are at the top of the interest rate cycle.
Only NAB believes that one further interest rate rise is still on the cards which they have predicted for November.
They then all believe that interest rates will drop by the end of next year, however, Westpac and NAB believe that rates will come to their lowest levels by the end of 2025.
See below their predictions:
CBA: Peak of 4.10% in June 2023, then dropping to 3.10% by end of 2024
Westpac: Peak of 4.10% in June 2023, then dropping to 2.60% by end of 2025
NAB: Peak of 4.35% by November 2023, then dropping to 3.10% by early 2025
ANZ: Peak of 4.10% in June 2023, then dropping to 3.85% by December 2024
Vacancy Rates
Sydney witnessed a narrowing of vacancy rates, declining by 0.09 percentage points to reach 1.65%. Meanwhile, Melbourne's rental vacancy rate remained stable at 1.41% in July, marking an 0.82 percentage point drop compared to the same period a year ago, marking the most significant annual decrease recorded among all capital cities.
Brisbane's rental vacancy rate experienced minimal change, inching up by just 0.01 percentage points to 1.15%.
In Perth and Adelaide, the rental markets remained exceptionally tight, with vacancy rates hovering just below 1% in these capital cities.
The situation was equally challenging in regional areas, where the supply of rental properties decreased as well, causing the vacancy rate to dip by 0.04 percentage points to 1.51%.
It seems to be that in capital cities where property prices have increased in the past year the vacancy rate has remained exceptionally low - like Perth sitting at 0.5%.
It appears the rental crisis is getting worse in recent months as in the last 60 days the number of rental listings has decreased by 12.5%.
Considering we were already in a rental crisis at the beginning of the year this is a worrying sign.
The government may have to step in and do something, but what that is I’m not sure.
Property Price Update
If you look at the yearly data, property prices have remained relatively stagnant across the past year. However, in the past quarter, there have been strong increases at every capital city with the biggest increase being in Brisbane at 4.3% in a quarter.
Since bottoming out in February, the national home value index (HVI) is up 4.9 per cent, adding about $34,301 to the median home price.
Every capital city except Hobart, which recorded a dip of -0.1 per cent, recorded a rise in home values. The highest increase in home values was in Brisbane, ahead of Sydney and Adelaide.
Sydney has led the recovery trend to date with a gain of 8.8% since property prices bottomed out late last year.
From a quarterly perspective and where property prices are headed it appears we are due to experience some significant growth across the capital cities over the upcoming months into 2025.
If rumours are correct and interest rates decline next year giving borrowers cheaper repayments and larger borrowing capacities. I can see a large and fast rise in property prices across the country.
What The Agents Are Saying
Not all agents are experiencing a rise in stock.
You may have noticed that stock has been increasing across many areas in southeast Melbourne.
We do a lot of work around Malvern, Malvern East, Glen Iris & Camberwell and have noticed stock in this region has jumped quite significantly in recent weeks.
Also further toward the city around Albert Park & South Melbourne, we have noticed multiple listings hit the market.
Days on market are still extremely low for good properties in the outer suburbs around Melbourne.
The Wow Factor!
46 Montana Street, Glen Iris, Vic 3146
An exceptional home in Glen Iris with one of the largest blocks in the area at 1200 m2.
Plus, check out the glass ceiling across the formal living, with the Nero Picasso stone, Carrara marble and Dekton benches in the kitchen and the remarkable marble ensuite upstairs!
Price Guide: $4,200,000
In The Media
Victoria’s minimum rental standards criticised by outgoing VCOSS chief, as ‘dump’ listed in Ballarat
A property has been listed for rent in Ballarat for $250 per week which has sparked a lot of questions about Victoria’s rental standards.
Photos in the advertisement show an outdoor toilet at the rear of the backyard, inside what appears to be a newly constructed corrugated iron structure with clear plastic roofing and mostly mud on the ground.
The kitchen, consisting of an oven with stove top, sink and cupboards, is spread across three separate areas and described as "open plan" in the listing.
I think the rental crisis is represented quite clearly here, with people absolutely desperate for a home to rent that they’ll even rent dumps like this.
Final Thoughts
A hopeful month for property owners and those looking to get into the market.
Interest rates look to have peaked and aren’t expected to increase unless there is a drastic change across the global economy or inflation data.
Property prices have passed their bottom and are rising, though more stock is coming onto the market which should make it easier to get into the market over the coming months.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
