RBA Announcement – October 2023

The housing market showcased commendable resilience, with dwelling values in Australia increasing by 0.8% nationally in September, following a 0.7% uptick in August. Specifically in Melbourne, dwelling values experienced a rise of 0.4% in September and 1.3% over the quarter.

Broadly, Australian households have demonstrated resilience in the face of escalating interest rates, and new buyers have managed to maintain their momentum despite a significant decrease in their purchasing power.

Between 2016 and 2019, borrowing capacity began contracting but found a reprieve during the COVID period, temporarily alleviating the impact of the Royal Commission. This relief, however, was short-lived as rates escalated by around 400 basis points, resulting in a cash rate twice as high as its 2014 level. As indicated by CBA's borrowing capacity index, this resulted in a diminished borrowing capacity, marking about a 40% decrease for certain households compared to 2016 levels.

While rising interest rates pose a significant challenge to borrowing capacity, the mortgage market's resilience can be attributed to robust wage growth, particularly in upper quintiles. This wage growth supports the ability to manage interest rates and the increasing cost of living.

According to data released today by the Australian Bureau of Statistics (ABS), in August 2023, new loan commitments for total housing increased by 2.2%, Owner-Occupier housing loans rose by 2.6%, while new Investor housing loans increased by 1.6%.

Additionally, Australia registered a 7.0% rise in dwelling approvals, rebounding from a 7.4% decline in July. Approvals for private sector houses rose by 5.8%, ending three months of stability, while non-house dwellings surged by 9.4%, recovering from a 14.6% dip in July. Overall, total dwelling approvals were mixed - Victoria led with an increase of 22.2%, followed by New South Wales (+12.5%) and Western Australia (+12.3%). On the flip side, Queensland (-26.9%), Tasmania (-10.1%), and South Australia (-6.9%) charted declines.

If you are interested in understanding your borrowing capacity in today's economic climate, please feel free to contact us for an obligation-free consultation.

Contact: Harry Bongiorno – 0437 321 976