A Market Ripe for the Picking
By: Tim McGuire
April 22, 2023
  • The Reserve Bank can’t really raise interest rates if inflation is falling.
  • CCCFA rules being relaxed so lending could get easier.
  • Immigration is back to pre-covid levels which will result in higher rents.

The recent news that inflation in the economy has stopped increasing is great news indeed for those who are looking to make a move in real estate. This is because until now, the Reserve Bank has been increasing the cost of borrowing money in order to curb inflation. Latest figures released have confirmed that inflation has dropped to 6.7% - much less than anticipated, and even less than that of Australia. Now that inflation has stabilized, it is likely that interest rates will also stabilize too, which means that the cost of borrowing money will likely remain at current levels if not taper off. This is good news for those who are looking to buy or sell property, as it means that the market will remain stable and predictable in the lead up to the election.

Inflation is a measure of the increase in the cost of goods and services over time. When inflation is high, it means that the cost of living is increasing, which can put a strain on households and businesses. One of the ways that governments and central banks can control inflation is by increasing interest rates. When interest rates are high, it becomes more expensive for people to borrow money, which can lead to a decrease in spending and investment. This decrease in spending and investment can help to reduce inflation.

However, when interest rates are high, it can also make it more difficult for people to buy and sell property. This is because higher interest rates mean higher mortgage payments, which can make it harder for people to afford to buy a property. Similarly, higher interest rates can make it harder for people to sell their property, as potential buyers may be less likely to be able to afford the higher mortgage payments.

The good news is that now that inflation has stabilized, it is likely that interest rates will also stabilize. This means that the cost of borrowing money will remain at current levels, making it easier for people to buy and sell property. This is good news for those who are looking to enter the property market, as it means that they will be able to do so without having to worry about sudden increases in interest rates.

Furthermore, stable interest rates can also make the property market more predictable. When interest rates are stable, it is easier for buyers and sellers to plan their finances and make informed decisions about buying or selling property. This can help to reduce uncertainty in the property market and make it a more attractive investment option.

In addition to thiis shift in the economy, changes to the way that banks evaluate prospective borrowers will likely lead to buyers being treated more graciously by lenders when they look at their discretionary spending. It is less likely you'll be punished for indulging in your physical and social wellbeing and avocado eggs on toast might even be viewed as acceptable fare for us plebs again!

Pressures from a higher rate of new migrants are likely to drive the cost of renting even higher, and with plenty of new faces about, the job market may get more competitive for those looking to make a sideways shift. We have had high employment in the last 18 months resulting from liberal money printing at Treasury. The Reserve Bank Governer has been overtly stating that he wants unemployment to rise, and under these new conditions, he'll likely have his wish granted.

Although the interest rates we are experiencing are lower than the historic average of mid-7s, with the culmonation of increased immigration, changes to lending policy, and a drop in inflation those at the helm will be hard-pressed to justify keeping the official cash rate at current levels. Household incomes, and more specifically debt-to-income ratios, operate in a different league to by-gone eras.

In recent times, the property market has experienced a decline in prices, but there are indications that the market is experiencing a shift. An historic low in sales volume this last summer and prices stagnating is indicative of an impeding inflection. It's difficult to confirm this until we are able to look back on the numbers and evaluate it. We have seen a massive uptick in the number of first home buyers at open homes and even some investors making an appearance again. As agents, we have the benefit of seeing firsthand what is happening in the marketplace, which may differ from what is being reported in the media. From my observation, it seems that the current market presents the best opportunity for great deals. To discuss your plans going forward, be sure to contact us to see your plans come to fruition!

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Written by
Tim McGuire
With over two decades of experience in real estate, Tim has a track record of impressive sales, accolades, and recognition. He...