April Wrap Up 2022

Greetings from Scoutable and welcome to our April Wrap Up.
 
The Reserve Bank of Australia (RBA) announced yesterday an increase to the cash rate by 25 basis points from 0.10% to 0.35%. This is the first rate rise since November 2010.
 
The following table from RateCity shows the monthly increase to loan repayments, based on an average owner-occupier paying principal and interest with 25 years remaining on the average variable rate of 2.92%. All four major banks will pass on the cash rate hike in full - CBA (20th May), Westpac (17th May), ANZ & NAB (13th May). 

RBA Governor Dr Philip Lowe said he was aware of the central bank's role to play in controlling inflation. “The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wages growth is picking up,” he said.

The RBA expects inflation to rise further in the near future. “The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” Lowe said. “This will require a further lift in interest rates over the period ahead. The Board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.”

Although we enter a period of higher interest rates, the risk of households falling behind on their mortgage repayments is reduced because many households are ahead in their mortgage repayments (savings in offset accounts). The RBA has recently noted the median repayment buffer for owner occupiers with a variable mortgage rate is 21 months of scheduled repayments as at February 2022. 

Tim Lawless, Head of Research, CoreLogic reported - "The extent of any housing market downturn depends on how high and how fast interest rates rise, but also a variety of other factors will be at play. Labour markets are currently showing the lowest unemployment rate since the mid-1970’s, and conditions are set to tighten further. Such a low unemployment rate, along with an expectation for higher income growth, should keep distressed listings at relatively low levels".

Lawless further commented, "Mortgage distress should also be minimised, to some extent, by mortgage serviceability assessments at the time of the loan origination. All borrowers would have been assessed to repay their mortgage under a scenario of mortgage rates being 2.5 percentage points higher than the origination rate, and since October last year, borrowers were being assessed at mortgage rates of 3 percentage points higher. Under these serviceability scenarios, borrowers should be able to accommodate higher mortgage repayments costs, although such a rapid rate of inflation could create some challenges for borrowers with thinly stretched budgets".

CoreLogic’s national Home Value Index (HVI) continued to lose steam through April. Housing values are still rising at the national level, however, the 0.6% monthly rate of growth is the lowest reading since October 2020.

The rental market is continuing to experience growth across all capital cities. According to CoreLogic, nationally, rents were up 2.7% over the three months to April, taking the annual change in national rents to 9.0%. A year ago, the annual change in national rents was 4.9%. Higher yields could see investors comprising a larger portion of housing market activity. 

Please get in touch if you would like to discuss the current conditions of the market. 

Until next month,

Kellie Landrey | Principal Buyers Agent

IN THE NEWS

PROPERTY OF THE MONTH

360 Belmore Falls Road, Shady Glen (Robertson)

360 Belmore Falls Road has us dreaming of a tree change.

The property is located in Roberston, approximately 140km south of Sydney, in the Southern Highlands. Roberston is known for its fertile soil and high annual rainfall. The town is surrounded by lush pasture used for beef and dairy production.
 
The property is positioned over 42 acres, providing two dwellings. The main house comprises three bedrooms, two bathrooms and multiple living spaces. The second dwelling provides three bedrooms, which can be divided into a two-bedroom home plus a one-bedroom flat with kitchenette.
 
Other features include four paddocks, horse facilities, a machinery shed, trout-filled creek, fruit trees, vegetable garden, 600sqm chicken run, water tanks, 51 solar panels, landscaped gardens and freshwater swimming pool.

The price guide is $12,000,000. 

If you'd like to know more about this property or any others, please get in touch.