REIP Inside Real Estate – 3rd May 2023

There was much debate ahead of yesterday’s interest rate decision about what the outcome would be, but again we have seen a 0.25 basis point uplift increasing our cash rate to 3.85%.

The ABC has reported that this increase has taken markets, banks and borrowers by surprise. Inflation is still at a 7% high and the message is clear from the RBA, we need to bring inflation down. The Treasurer in his statement yesterday stopped short of predicting a recession. There seems to be a consensus that we are at the peak of the rate increases, and it’s not just interest rate increases the consumer has to deal with. Increase in the cost of groceries, fuel and utilities is also causing much pain.

The biggest impact will likely be felt by those who are buying out of necessity and may now need to buy at a lower price point, those who have been saving for their deposit and now can’t afford a property they looked at last week, and those who will buy anyway as they’re doing it for investment or tax benefits. If rates continue to go up, we’ll likely see a real slowdown in the market, which will again lead to increased pressure on the rental market.

What’s interesting is the impact one pause on rates can have on the market. Last month’s pause has led to home values starting to climb for the second month in a row. This in turn seems to be fueling another political debate about housing affordability and the Greens are now calling for the federal government to freeze interest rates and rents.

At face value, a freeze on interest rates may sound like a great idea, but the question then becomes would a rent freeze prevent investors from entering the market at a time when we need more rental properties?

There is a lot going on in the property market and many of our clients may be overwhelmed or confused by the amount of information and data. Each client will have different needs, at the end of the day none of us control the market, we can however work to make the purchase, sale or leasing of their homes as seamless as possible.

Something else that caught my attention this week was the ‘size matters’ debate in relation to Melbourne apartments. I’ve been saying for years that if we want to attract more people to inner-city living, we need to build them bigger. We can’t expect renters to live in shoe boxes or investors to get top-end returns in places that can’t comfortably fit two people.

In my latest Future Fit Leadership Podcast I was joined by Ashleigh Morris of Coreo to dive a bit deeper into the economy and unpack the differences between a linear vs circular economy. The circular economy is the future state countries and businesses are moving towards. It has the ability to create millions of jobs and trillions in revenue, so it’s well worth a listen and share! You can hear it here.

REIP Nexus has just released its data on the 20 ‘hottest’ suburbs across the nation. While NSW is trailing Victoria in terms of premium sales prices, it’s leading the way with less days on market. You can read more here.

Until next time.

Stay connected,

Sadhana Smiles
CEO, Real Estate Industry Partners