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Real Estate Market Update – May 2022

News

Attwood Marshall Lawyers Property and Commercial Department Manager Jess Kimpton discusses the latest property market trends and the legal and financial obstacles real estate agents, buyers and sellers may be facing as the end of financial year looms.

Proposed political policies

Can the boy who was raised in public housing be the change-driver to tackle Australia’s housing affordability crisis? With a change of government now in force, we look at the policies that Labor may implement to help all Australians achieve the great Australian dream of homeownership.

Labor has promised to create a $10 billion Housing Australia Future Fund which will see 30,000 new social and affordable housing properties built in the next five years, creating thousands of jobs in the process.

In addition, Labor plans to keep the Coalition’s ‘’New Home Guarantee Scheme, which was introduced in 2020 to assist people looking to build or buy a new home and live in it as their primary residence, whilst introducing a second program, the ‘Help to Buy Scheme, where the government would have shared equity in the property. This scheme would be available for up to 10,000 people each year who are planning to buy a new or existing home and live in it as their primary residence.

Labor’s shared equity scheme was recommended by the Grattan Institute, an independent research institution that helps shape the Australia policy conversation, however, there are economists who have also come out and said that these will really on scratch the surface of the housing affordability issues in Australia and likely will only help a very small percentage of people.

Only time will tell if the new government will be able to help level the playing field and tackle the housing crisis successfully.

Market overview and RBA cash rate

The property markets have faced a lot lately, and it is being reflected in flat property markets in both Sydney and Melbourne and a downward shift in price growth in smaller capitals.

Decreasing affordability, a notable increase in mortgage rates, and the media rife with stories of real estate Armageddon has diminished buyer enthusiasm. Despite this, vendors are still hoping to get top dollar, which is reflected in falling auction clearance rates.

With housing prices stalling in two of Australia’s biggest markets, Sydney and Melbourne, the Gold Coast has continued to rise with April seeing a 1.7%increase in property values, which is in line with Brisbane.

Given the continued record levels of housing prices across Australia, investors are being lured back to the apartment sector.

Overall Australian dwelling prices rose 0.3% this May to be 14% higher year on year.

However, capital city rental markets continue to tighten, with the record low vacancy rates still falling.

On 3rd May 2022, the central bank raised its cash rate target from the record low 0.1% it had lingered at since November 2020, during the depths of the Covid pandemic. It increased more than expected to 0.35%, and the RBA signalled more rises to come.

The CommonwealthANZ and Westpac banks announced they would match the RBA’s move and raise their variable home loan rates by 25 basis points.

Though the rate rise will hurt borrowers, those with deposits will be cheering after years of little to no return. The commercial banks will pass on the rate increase to both lending and deposit rates, but the size of the hike and pace of adjustment will no doubt draw scrutiny.

Inventory levels

Sale and listings

With dampening buyer demand, there are more houses on the market for sale, but currently, there is no oversupply as discretionary vendors are holding back – there is no reason for them to sell at present.

Sales volumes rose 13.7% in the 12 months to April, to an estimated 597,506. Sales volumes were an estimated 117,698 through the three months to April, which is down on the same period of 2021, but 17.1% higher than the previous 5-year average.

At the national level, properties are taking marginally longer to sell. During the three months to April, median days on the market were 27, up from a recent low of 21 days during the three months to December.

Discounting levels are gradually expanding from recent lows of 2.8% nationally and rose to 3.1% in the three months to April 2022. In addition, discounting remains tighter across the combined regional markets.

More advertised stock is being added to the market than normal. The four weeks to 1st May saw new listings trend 6.3% higher than the previous five-year average at the national level.

Total listings remain vastly below the average for this time of the year at the national level, as high sales volumes have helped absorb the advertised stock. As a result, total stock levels remain -30.3% below the five-year average.

Clearance rates averaged 63.2% in the four weeks to 1st May, down from 77.6% in 2021. Clearance rates are anticipated to trend lower amid softer housing value growth.

Lender’s attitudes

In March, lending for property purchases increased by 1.6%, driven by investor lending (up to $327 m, or 2.9%) and first homebuyer lending ($285m, or 5.9%).

Nationally, investor finance comprised 35.2% of new mortgage lending through March, which is above the decade average of 34.9% and was driven by solid monthly growth in NSW and VIC investor financing.

Nationally, first home buyer finance as a portion of total owner-occupier finance picked up to 23.6%. This is up from 22.5% in February 2022 and coincides with growth in first home buyer finance of 5.9% nationally through March.

Low mortgage rates have incentivised home buying activity, but fixed rates have risen. Variable rates are also starting to lift off the back of cash rate increases, which is expected to put downward pressure on values and sales volumes.

Attwood Marshall Lawyers – facilitating smooth property transactions and ensuring settlement happens on time

Many buyers and sellers are looking to save money wherever they can when buying or selling property. However, cutting corners by not getting the right advice and assistance from an experienced property lawyer when buying or selling real estate can put homeowners in a vulnerable position, potentially costing them significant money and heartache down the track. If the transaction is not handled by an experienced property lawyer, it may also endanger the completion of the contract and the entitlement to commission by the real estate agent. In falling markets, buyers can get cold feet and try to terminate the contract. It is very important that agents have all their ducks in a row and ensure the contract and Form 6 are watertight. We are more than happy to help with any contract enquiries agents have.

Our property lawyers enjoy working with real estate agents, house hunters and sellers to help them achieve their property goals. We can offer FREE pre-signing advice on all Queensland Contracts and help draft special conditions or negotiate between parties to protect everyone’s best interests and help property transactions proceed effortlessly.

To avoid risk or unnecessary delay, or obtain the advice you can trust, contact our Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, mobile 0432 857 300, or email jkimpton@attwoodmarshall.com.au

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