While there were no major surprises in the recent Federal budget for investors and established buyers, the expanding of eligibility requirements for several government subsidised home buying schemes will ease the way for far more Australians to enter the market than before.
Significantly, some schemes that were once solely for newcomers to the market will soon become accessible to non-first home buyers. From July 1 eligibility for the First Home Guarantee and Regional First Home Buyer Guarantee will be extended from couples who are either married or de facto to include any two borrowers jointly applying. The revision effectively opens the subsidised scheme to friends, siblings, family members and more. Also eligible for the two schemes for the first time will be non-first home buyers who have not held a property interest in Australia within the previous 10 years.
The changes come at the same time signs of a market recovery appear faintly on the horizon. All major research shows home prices edging upwards in the first steps on the long road back to stability.
Prices have been rising ever so slightly across capital cities in the last couple of months despite the Reserve Bank of Australia (RBA) lifting rates 11 times since last year. In May, the RBA defied forecasts by increasing interest rates once more by .25 per cent to bring the cash rate to 3.85 per cent – the highest level since April 2012.
The housing market’s surprise albeit modest recovery in the face of multiple rate rises is being attributed to several factors including higher migration, the tight rental market, and a basic short supply of residential properties. Property prices are further being protected by the lower listings typical in the lead up to winter and that force buyers to compete for a smaller pool of homes.
And the news gets better for homeowners and potential buyer: Westpac last month revised property price rise forecasts for next year from 2 per cent to 5 per cent. Australia’s housing correction is largely over, several factors combining to produce a stabilisation,” Westpac chief economist Bill Evans and senior economist Matthew Hassan said in a market update.
Sydney is leading the capital cities for property price rises. According to the most recent CoreLogic housing index (April 30, 2023), median dwelling values in Sydney rose 1.3 per cent in the past month and 3 per cent in the last quarter. Sydney’s median home value is now $1,031,138. Corresponding figures for Melbourne are 0.1 per cent; 0.3 per cent, and $751,125.
In Sydney, prices have been edging up every month since February. The affluent suburbs which bore the brunt of the most recent downturn are now those leading on the way back up.
As for forecasts that vast numbers of homeowners were headed for a “fixed rate cliff”, RBA shows this was nipped in the bud by a large proportion of mortgage holders choosing to make extra repayments while rates were low. Additionally, a significant proportion of homeowners had refinanced. Latest RateCity data shows that the average owner-occupier paying a variable rate could face a home loan rate of 6.86% sometime this year.
Looking at what lies ahead, most major banks forecast rates will only being to fall at the start of next year. The only one to differ is the Commonwealth Bank whose chief economist Gareth Aird expects rates to start their downward trajectory before the end of this year but only if inflation starts falling too. Many pundits believe we may well have seen the peak of inflation, and that when consumer confidence heads back into positive territory, the property market is will follow.
What is clear is that Sydney needs more investors to help ease the current rental crisis. Record high rents show no sign of abating - CoreLogic data released on May 3 showed Sydney rents had climbed 13.1 per cent in the past 12 months and 1.3 per cent in the past month. But for many investors these higher rents are proving the ideal buffer against higher loan repayments.
ANZ: One further cash rate hike to a peak of 4.10% by mid-year. No rate cuts until at least 2024.
CommBank: Previous forecast was for rates to peak this year at 3.85% which was the level the RBA then set in May. Rates to start dropping by end of this year as long as inflation starts falloing too.
NAB: Cash rate to remain at current peak of 3.85% for the rest of the year, then fall to 3.35% by March 2024. NAB expects the cash rate to fall a further 25 basis points to 3.1 by June 2024 where it will stay for the rest of the year.
Westpac: Cash rate to remain at current peak of 3.85% for the rest of the year before falling 25 basis points in March 2024 to 3.6%. Further cuts predicted throughout 2024.