What goes up 👆🏼 must come down 👇🏼.. but when??
We’re heading into Spring - the time of year when we traditionally see the property market hit it’s straps. Media headlines are about as reliable as our weather reports and depending which channel/station you listen to, you can get as many differing reports as we get seasons in one day here in good old Melbourne.
The advice I always give home owners is to speak to a local expert, so I followed my own advice and made some time to gain some independent insights.
I sat down with the home loan specialist from Westpac in Cranbourne, and next was a catch up with a Property Valuer who has a wealth of experience in our local area and has always had his finger on the pulse. Additionally, with his professional network we are able to get a huge amount of insight into behaviours and an update around what they are hearing from multiple lending companies.
So what do you want to know first… interest rates or prices??
Let’s run down interest rates first:
Consensus is that “if” we are not currently at the peak, there is definitely light at the end of the tunnel. The unknown is how the new incoming RBA Chief will make her mark in her first meeting. Inflation is tracking steadily downward which is the goal, but we are still a fair way off the desired 2-3% meaning they may still have one more push before the end of the year. Hopefully they also take into account the overall health of the economy and hold steady to monitor it as it naturally find it’s “new” balance.
That’s great Jo, but what we want to know is when will they be coming back down?!!
Frustratingly no experts can agree on the timing… except that it’s not anytime in the next 6 months and potentially even a little longer. (Insert disclaimer here - subject to change should we have another global event or an unforeseen economic crisis here in Australia)
How low will they go?
The pandemic driven “free” money days are over.
They were historically low interest rates due to a set of crazy circumstances, and we are just not going to see those super low rates unless crazy comes to the world again.
So what will we likely see?
Historically it has been normal to have rates averaging around the 4-5% mark for low risk loans. The consensus appears to be are we will likely see the rate reduction cycle land with a 1% drop from where we are now. With lenders currently offering rates at under 6% we could be potentially be looking at a 5% rate by the end of 2024.
This won’t be welcomed by anyone who is coming off the super sweet fixed interest rates sooner rather than later, and that brings in the next topic … what is going on with prices??
Prices:
From our own observations at the coal face and confirmed in the conversation with Josh (Property Valuer), a consensus has been reached that any price corrections that were going to happen have already been seen. The key reason why we haven’t seen prices drop by any significance locally is due to the under-supply of homes on the market for sale. There has been a more noticeable drop in the premium markets such as the Mornington Peninsula, but here we have remained by all comparison, fairly well insulated. The latest news from Valuers is that they are treating the market as “flat” and steady.
So if you’re looking to make a move, conditions on both sides of the move will be calm provided you are moving in the same market. If you’re looking to upgrade/upsize, now may very well be the ultimate time. Should you be exiting the market and wanting to cash out with the most amount of money possible, potentially you may need to hold that thought for some time yet.
Warning: I am inserting a disclaimer right here…
Based on a recent article from Mark Bouris, (founder of mortgage company Yellow Brick Road), Mark has been very vocal about the impact of interest rates on inflation and the number of mortgages about to come out of their super low fixed rate periods. Projecting forward to the end of 2023, Mr Bouris is quite clear in his message that there will, in his opinion be a tipping point that sees a surge of property put up for sale. Should this eventuate, there will be a supply and demand shift.
The result? Buyers with more choices, negotiating harder leading to lower prices.
Remember… Whether you choose to sell isn’t just about current market conditions, but also the timeline of your own personal circumstances. For some of us, we needed to upsize or downsize yesterday, while for others, waiting for the market to rise might be a strategic move to release more capital before retirement.
Whatever your plans, we’re here to answer any questions and guide you through every step of the way.