Bud Streten – Streten Property Group
The Reserve Bank met on Tuesday 2nd August to announce the news of another interest rate rise of 0.5 percent. With interest rates being raised for the fourth straight month it makes many ponder the question; What do the higher interest rates mean for our property prices, and where will we end up?
We have already seen the market coming off the boil here in Queensland, not nearly as much as much in Sydney or Melbourne, but it has certainly slowed. The figures from July 2022 illustrate that the housing market has retracted 0.8 percent. There was also a decrease of 2.2 percent for houses and an increase in the unit market by 0.7 percent. We are seeing buyers shift over the last few months from houses to townhouses. There has been a trend toward the high-end units as well, but we expect to see units have their day after the townhouse market has been exhausted.
The gap between buyers and sellers has remained stable in the lower end of the market. However, the gap has widened significantly in the high-end properties. This gap is also demonstrated by auction clearance rates down to 47 percent in July 2022.
During the COVID rush in real estate, we saw buyers overpaying and snapping up any property in any area, regardless if it was located on the main road or in a school zone. We are now seeing buyers slowing down and applying their wants and needs before purchasing, not settling for paying a premium for sub-grade properties. In recent times properties were selling within a week of listing with multiple buyers compared to now, where buyers are being more cautious. Furthermore, sub-grade properties or high-end properties are sitting for more extended periods of time on the market.
Another trend we are seeing emerge is the common occurrence renovator properties. This means that properties that need a little TLC are selling and are in demand. Forcing equity is always a good strategy if you can get your figures right and find the properties that work. Here at Streten Property Group, we successfully utilise this strategy with clients and have done so in many market types. We tend to see this attract first-home buyers who are happy to live in a home and slowly make it their own.
Once again, townhouses are in demand and are still selling quickly, usually for the asking price. This shift will drive their selling price as demand increases, and we should see this to continue to occur over the next few months. We can expect that there will then be a transition to units becoming more in demand and as a consequence their prices will increase.
So, with interest rates rising once again by another 0.5 percent, this has taken the official cash rate from 1.35 percent to 1.85 percent. This means that the average borrower with a $500,000 loan will have a monthly increase of $140 if the life of the loan is 25 years. This rate increase translates to an extra $472 per month since the Reserve Bank of Australia started increasing the rate in May 2022. A borrower with a $750,000 loan over 25 years will have their repayments increase by $211 per month or $944 per month compared to May 2022.
In summary, the market in South East Queensland is very much property specific rather than suburb or area. Each suburb and region will see its properties settle back into their desirability categories. This shift has been reflected by the prices and demand reflecting. As interest rates rise and house prices remain high, buyers will naturally transition to townhouses and units as affordability allows. Regardless of interest rate increases, the market wouldn’t be able to sustain the growth it has been experiencing, with a national rise of 35 percent since the start of the pandemic.
At Streten Property Group, technology allows us to manage properties all over South East Queensland. Properties located 2 hours away get no more or less attention than one on my street. A “good” manager can do their job effectively no matter where they are and now has the technology to thank and back them up.
Contact Bud Streten
Phone: 0436 486 444