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Real Estate

What does the latest RBA cash rate rise means for property prices, inflation and the risk of tipping into a recession? RMIT expert available for comment. – RMIT

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NSW Northern Rivers Breaking News

What does the latest RBA cash rate rise means for property prices, inflation and the risk of tipping into a recession? RMIT expert available for comment. – RMIT

An expert from RMIT is available to comment on the latest RBA cash rate rise and what it will mean for Australia’s housing market and the economy more broadly.

Dr Woon Weng Wong, Lecturer, School of Property Construction and Project Management, RMIT University 

woon-weng.wong@rmit.edu.au

Topics: Economics, Econometrics, Finance, Property, Quantitative analysis, Statistics

“The rising cash rate will undoubtedly have a negative impact on the residential property market. However, we are only just beginning to see the first signs of a gradual cooling off.

“Looking at our most basic measures like median house prices, the month of June recorded a 0.35% drop from the previous month across all capital cities. Melbourne experienced the greatest decline with a 0.66 percent drop. This is reflected in the auction clearance rates which was 55 percent in the week ending July 4, which is a considerable reduction compared to 74 percent during the same time last year.

“But if we look at the bigger picture, the property market is still running hot with national prices approximately 7.76 percent higher in June compared to the same time last year, with Sydney and Melbourne trailing at 5.41 percent and 3.85 percent respectively.

“And if we go even further back, comparing current prices to the start of the pandemic (circa January 2020), the national median is approximately 35 percent higher with Sydney and Melbourne at 37 percent and 22.5 percent respectively. What this means is that property markets are showing signs of a slowdown but these are relatively minor compared to the substantial gains experienced over the past couple of years.

“Further cash rate rises are expected for the remainder of the year as the RBA aggressively targets inflation, which does not appear to be abating anytime soon with the conflict in Eastern Europe, the energy crisis, labour shortages and recent extreme weather events continuing to wreak havoc on the Australian economy.

“However, the consensus seems to be that further rate rises may be less onerous with the target cash rate anticipated to be 2.1 percent by the year’s end. The current cash rate is 1.35 percent, so that only leaves 0.75 percent on the table over the next 6 months. The cash rate is expected to eventually settle at 2.5 percent by the middle of next year. House prices will likely continue their downward trajectory with modelling by the RBA’s latest financial stability review indicating a 15-20 percent decline over a two-year window based on the assumption of a 200 basis point rate rise.

“The only scenarios in which the RBA might reconsider its hawkish position are inflation being brought under control sooner than anticipated; or a recession develops. The inflation question does not have a simple answer requiring everything from supply chains being fixed to easing consumer demand and a moderating rental market.

“Even if these issues could be resolved, the ongoing conflict in Eastern Europe remains the proverbial elephant in the room. Since the conflict began, crude oil prices (WTI) have risen from approximately USD78 per barrel in January 2022 to its current level of USD110 per barrel. Furthermore, the gas crisis continues to plague Western Europe as the German led exodus scrambles to secure alternative sources in preparation for winter in the northern hemisphere. When and how hostilities will end remains unclear.

“On the recession front, if the situation in Eastern Europe is the proverbial elephant, then a recession is the proverbial whale. The risk of a recession is real but may be avoided so long as economic fundamentals remain strong.

“According to the latest ABS data, the unemployment rate remained at a record low of 3.9 percent in the month of May. This is in stark contrast to the 1991-92 recession ‘we had to have’ in which unemployment rates hovered around 8-10 percent. In a recent UBS panel discussion in Zurich, RBA Governor Phillip Lowe stated there was a “narrow path” for inflation to come down without tipping the economy into recession.”

 

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Local News

Unlocking Affordable Housing Investment Opportunities Across Australia’s Cities

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Gagebrook in Tasmania Affordable Housing Investment Opportunities

Unlocking Affordable Housing Investment Opportunities Across Australia’s Cities

 

For many aspiring homeowners, the dream of owning property remains elusive, particularly in Australia’s major cities where soaring property prices present formidable barriers to entry. However, pockets of affordability exist, offering hope to first-home buyers seeking to navigate the housing market maze. A closer examination reveals that certain cities boast a higher proportion of suburbs where property prices fall below the national median value, providing accessible Affordable Housing Investment entry points into the real estate landscape.

At a national median house value of $792,000, affordability remains a pressing concern, with only 35% of city suburbs offering properties below this benchmark. Yet, there are cities where the odds tilt favourably for prospective buyers. Darwin emerges as a beacon of affordability, with a staggering 90% of suburbs boasting median house prices below the national average. Similarly, Hobart (70%) and Perth (64%) present ample opportunities for budget-conscious buyers, albeit with dwindling listings in the latter.

Gagebrook in Tasmania Affordable Housing Investment Opportunities

Gagebrook in Tasmania

Conversely, in Australia’s priciest urban enclave, Sydney, only a meagre 8% of suburbs offer respite from exorbitant prices, compelling buyers to venture further afield to satellite regions like the Central Coast or the outer west for more affordable options. Canberra follows suit as the second least affordable city, with just 13% of suburbs falling below the national median value, signalling a paradigm shift that sees it surpass Melbourne in the affordability index.

In the quest for affordable housing, certain suburbs emerge as veritable havens for budget-conscious buyers. Gagebrook in Hobart steals the spotlight with a median house price of $356,000, epitomising the notion that affordability need not sacrifice proximity to urban amenities. Darwin, Brisbane, and Adelaide also feature prominently, with suburbs like Moulden in Darwin offering compelling value propositions for savvy buyers.

The allure of affordable housing extends beyond detached dwellings to the realm of units, where opportunities abound for those willing to explore. Darwin leads the charge as the most affordable capital for unit buyers, with every suburb boasting median unit prices below the national median. Adelaide, Perth, and Hobart follow closely behind, underscoring the diverse array of affordable housing options available across Australia’s urban landscape.

In navigating the labyrinth of real estate, knowledge becomes the most potent ally for prospective buyers. Understanding where affordability intersects with desirability unlocks a treasure trove of housing opportunities, enabling individuals to find their place within the cityscape without compromising financial prudence. From Gray in Darwin to Carramar in Sydney, and beyond, affordable housing beckons, offering a pathway towards the realisation of homeownership aspirations.

 

For more real estate news, click here.

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Local News

Navigating Generational Housing Affordability Challenges: A Closer Look

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Cameron Kusher, Director of Economic Research at REA Group on Generational Housing Affordability challenges

Navigating Generational Housing Affordability Challenges: A Closer Look

 

Escalating property prices and the resurgence of interest rates have catapulted housing affordability to its most precarious state in decades, triggering a renewed discourse on intergenerational equity within the real estate landscape. As record-high property values cast a shadow over the dreams of prospective homeowners, the question arises: did Baby Boomers have it tougher, or do younger generations face the steepest uphill battle in achieving property ownership?

Examining both affordability and accessibility metrics can offer valuable insights into this contentious debate. The latest PropTrack Housing Affordability Report sheds light on the formidable deposit barriers confronting aspiring homeowners, with households grappling with the most challenging savings environment since records began in 1995. As home prices surge ahead of wage growth, the task of amassing a deposit has become a prolonged ordeal, stretching the average time required to save from just over two years in the 1990s to a daunting five-to-six year endeavour today.

Cameron Kusher, Director of Economic Research at REA Group, asserts that today’s younger cohort faces a considerably tougher housing market entry compared to their predecessors. While the era of the late 1980s and early 1990s witnessed sky-high interest rates, it also boasted more accessible property prices, enabling individuals to embark on homeownership journeys at a younger age. The landscape has since evolved, with escalating property values outpacing wage growth and rendering renting less affordable, exacerbating the savings challenge for aspiring buyers.

Cameron Kusher, Director of Economic Research at REA Group on housing affordability challenges

Cameron Kusher, Director of Economic Research at REA Group

With lenders typically requiring a 20% deposit to circumvent lenders mortgage insurance (LMI), the financial hurdle becomes even more daunting. In Sydney, for instance, potential buyers must amass over $211,000 for a 20% deposit on an average-priced property, underscoring the monumental task faced by many. While Darwin emerges as the most affordable capital for saving towards a deposit, the broader trend of rising property prices, rents, and living costs permeates across the nation, compounding the savings dilemma.

In navigating these formidable challenges, expert advice becomes indispensable. Terri Unwin, a Mortgage Choice broker, advocates for adopting a proactive approach by emulating the financial responsibilities of homeownership before embarking on the journey. By saving the difference between rent and anticipated mortgage repayments, prospective buyers can gradually acclimate to the financial demands of property ownership. Additionally, meticulous budgeting and setting achievable savings goals can provide a roadmap towards realising homeownership aspirations.

Moreover, leveraging government schemes and incentives can serve as a lifeline for deposit-strapped buyers. Initiatives like the help-to-buy scheme and the Home Guarantee Scheme offer financial relief and shared equity opportunities, easing the deposit barrier and broadening access to homeownership.

In essence, while the contemporary housing market presents formidable challenges, proactive financial planning, expert guidance, and leveraging available support mechanisms can empower aspiring homeowners to navigate the path towards property ownership, bridging the generational divide and unlocking opportunities for a brighter housing future.

 

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Lismore News

Social Futures welcomes the first Resilient Lands project but calls for more land and social housing targets

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CEO Tony Davies from Social Futures - Resilient Lands Program

Social Futures welcomes the first Resilient Lands project but calls for more land and social housing targets

 

Social Futures has welcomed the announcement of the first major Resilient Lands project to be delivered under the $100 million Resilient Lands Program but is keen to see the release of more land (under the program) and social housing targets.

Southern Cross University, Landcom (a state government agency) and the NSW Reconstruction Authority have signed an agreement to deliver more than 400 homes in East Lismore. The land is expected to come onto the market in 2026.

“This is a great first step,” said Social Futures CEO Tony Davies, “but of course we’d like to see the other post-flood land projects developed and delivered as soon as possible.”

The Northern Rivers will mark the second anniversary of unprecedented flooding that badly damaged more than 6,000 homes on February 28.

“Social Futures is also calling on the government to set targets for affordable and social housing on each land project, so that the working people who serve the Northern Rivers – nurses, tradesmen, police officer and teachers – can afford to buy a home in this beautiful region,” Mr Davies said.

“In London, new developments have a requirement for 50%. This is a once-in-a-generation opportunity to rebuild our community and ensure we have the right mix of housing for people on low-incomes, working people and also the tree-changers arriving from cities with more generous budgets.

CEO Tony Davies from Social Futures - Resilient Lands Program

CEO Tony Davies from Social Futures

“In short there needs to be a mix of housing so no one is left out in the cold.”

Mr Davies said the Northern Rivers Resilient Land Strategy, developed last year, cited that some 7800 new dwellings would be needed to accommodate people most impacted by the 2022 floods.

“We’ve long been waiting for this first announcement of land, but we are glad it’s out because the people of the Northern Rivers need certainty,” he said.

“The East Lismore project includes a 20% affordable housing target and land is also set aside for people to relocate homes.

“I would have liked to see a higher target for affordable housing and a definite target for social housing, because this region has about a 30%-plus shortfall in social housing compared to the state average.

“The Northern Rivers needs more housing close to services and public transport, and we need higher density housing.

“We are also hoping the federal Housing Australia Future Fund will finance much needed social and affordable housing for the Northern Rivers. This fund needs to target regional areas in acute housing needs, such as northern New South Wales.”

 

For more local Lismore news, click here.

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