Some Interest Rates Actually Went Down This Week?

How’s The Market | Edition 11

Now while the mainstream media latches onto the negative stories of heartache, builders going bust and households under stress (which they are), did you know that interest rates actually went down last week??

Macquarie were the first to go reducing some of their fixed rates by up to .76%, then CBA and Westpac released they were reducing 4 year fixed rates to 4.99%, for CBA this meant a reduction of 1.6% all off the back of an RBA rate rise of .5%? Confusing right…??

Let’s face it, the banks know way more than we do, so when they make a move like this it’s because they believe the storm could be short lived, and they want to grab as many customers as possible coming off fixed rates.?

The banks certainly didn’t do this out of the kindness of their hearts, it's actually a bit cheeky and a clever marketing tactic. If they offer a 4 year fixed rate that is extremely attractive against a variable to a customer that is coming off a fixed, what do you think that customer will do? Probably take the fixed rate, they were already on a fixed so they like the comfort of knowing their repayments, and most of these customers would be coming off rates of around 2.5% so to go to 5.8%, which is the current variable, is scary.?

Why this is cheeky is because lowering the fixed rate also means that they believe the cash rate is likely to come down over the next 12 months, and the variable could actually be lower over the 4 years.?

It’s because they believe the chances of rates coming down in the next 12 months will be likely, so if they can position themselves with a rate that looks extremely attractive against a variable and lock in customers for 4 years?

This week's Pro tip: Real estate is a finance game, always has been and always will be so if you are thinking about buying a property, yesterday was the best day to get your finance application in. This is because as the rates go up, your servicing goes down and you want to give yourself the best opportunity of purchasing by having a flexible budget. So in short, go and speak to a broker, and get your application in ASAP.?

What the agents are saying

It looks like we are going to have a delayed and rushed end of year.?

Vendors are currently in observation mode, and willing to wait to see what happens with other sales in the area. Essentially, no one wants to go first so most vendors will attend other opens, scope out the interest and see how auctions fair over the next few weeks.?

“A” grade properties are few and far between, so buyers are now asking the question “Where are all these good properties you mentioned”. At the moment I would say we have a supply issue, demand is down from this time last year, but no one could go to Europe so they looked at property, but there are buyers missing out on good properties as only one person can win at auction. The ripple effect of this is that for every “good” property that sells there are likely a few under bidders or buyers who were sitting on the fence and needed the confidence to see others were willing to buy, in turn bringing more competition to the market.?

Price points and areas

Houses?

We are starting to see housing stock coming back to the market with more properties online again over this last week.

We are also seeing a rise in properties off market as it appears listings are picking up for Spring.

Whilst stock is slowly rising in this market, good and great homes are still the most scarce property type with agents saying many vendors are happy to wait with the goal of aiming to sell prior to Christmas.

Apartments

Apartments are struggling right now as they have the highest supply and the lowest demand from buyers. We have seen 3 or 4 apartments this week with price drops as large as $50k.

Some of these apartments are not compromised and are actually decent apartments that were just initially quoted too high, scaring off buyers and have now been on the market too long.?

We’ve seen 2 apartments in particular drop over $150k off their price over the last 3-months and are still on the market desperately needing buyers.

Outer East

The outer eastern suburbs are still in high supply & even higher demand.?

There are no shortages of good stock here and days on market are still low. When comparing this market to the Melbourne market you can see a stark difference as prices have continued to grow over the last 3 quarters in comparison to the Melbourne market dropping throughout the same period which you can see below.

The Inner North?

This market is following the trajectory of the Melbourne market and slowly falling in price. There is a lot of average quality stock on the market here and a falling demand which is resulting in heavy price discounts.

As more stock will come online in spring, I can see this market taking a hit and falling for the rest of the year.

Bayside / Peninsular

The Peninsular market has been experiencing mixed results. The great ocean-view properties are still selling for decent prices, however, there are now less of these on the market. Because of this, more of the sales are happening around the $1m price mark which is taking up a larger portion of the data and reducing the median sales price.

In the media

This week news.com.au actually had some relevance to one of their stories however it was a few weeks late as we mentioned this a while back. You might remember a caveat to the price points we were discussing and that un-renovated properties are being severely impacted by the uncertainty around the building industry. This has forced a shift to the new stock on the market or ones which are move in ready.

“A” grade properties will always sell, but the majority of properties need to be priced correctly in this market, otherwise they will require reductions and go stale.

Pro tip 2 - Change your sort preference on realestate.com to oldest to newest, as you might find a hidden gem that was marketed incorrectly and has fallen to the bottom of the list because the vendor doesn’t want to spend anymore on marketing.?

News.com article

I might get shot here, but I find it interesting how someone like Tom Panos can provide commentary on the industry, while being a Director of News Corp…seems like he might have other motives for what he reports on.?

Final Thoughts

Based on our discussions this week with agents and brokers, we would estimate there is a window of opportunity of 8-12 weeks. This means that over the next 8-12 weeks, there will be less buyers in the mix and you will have a better chance to purchase with lower competition.?

Evaluate, and if something is out of your price point look for something that is in your budget and try to negotiate that property harder because it doesn't have as much interest and might need a bit of love. Focus on the location, the bones of the property and not what it looks like currently, you can change this over time.?

If you made it this far, thank you and if you have any suggestions on what you would like covered in the future please email me at [email protected]

Happy Buying!?

Note: This is my opinion, please seek your own expert advice when making decisions.