A Predictable Four Years Ahead?
All going well; the next 3-4 years is shaping up to be quite predictable. Long term interest rates for 4-year fixed-term loans have been increased by a number of lenders, which suggests that the banks are expecting a rate rise at this time.
I feel that lenders will start to be a little more cautious with their lending, with the flow-on effect of this being less ferocity from buyers. The short supply of available rental properties and increasing rental returns is a signal that it is a good time to be considering an investment property.
I believe that we won’t see a negative movement in housing values; what we will see is stability and a sense of true value for homes, particularly over the next 12 – 18 months. If we can help with any property advice, please let me know.
It looks as though a little bit of stability and sensibility is creeping back into our marketplace. We are starting to see a balancing effect in the Geelong real estate market, and this is not a bad thing as we have seen an acceleration and a rapid rise in house prices over the past six months.
While the balancing effect is not a reduction in prices, it will see some of the urgency and buying pressure taken away from our market. As it balances out, we will still see strong competition for some property; a good home, in a good location, that is well priced, will always command attention regardless of where the market is holistically.
Subdued wages growth in many sectors of employment will impact more price-sensitive purchasers, such as first home buyers and lower-income households. These purchasers will be finding it harder to enter the market as they have found it difficult to save for a deposit and stamp duty (where applicable).
The Australian Bureau of Statistics (ABS) has reported that for the first time since May 2020, there has been a fall in first home buyer loans; this has been a 4% decrease. This decrease opens up the marketplace to investors, and with the promise of increasing rents, there is an attractiveness to purchase an investment property.
The broad trend of houses outperforming the unit sector continued through April as higher density styles of housing experienced less demand amidst elevated supply across some inner-city precincts. This sector is where I see one of the biggest opportunities for an investor.
The Spirit of Tasmania will have an enormous impact on our inner-city market; there will be an increase in tourism and a surge in demand for short term accommodation, including Airbnb properties. That is not to say you should offer your property as a short stay option, rather that you could achieve a solid long-term lease due to the reduced supply of properties being offered as long-term rentals, as owners look to capitalise on the short-term gains.
In my next market update, I will summarise the 2021 Budget, but one thing that did stand out was the change in age for the ‘Downsizer Super Contribution’ scheme. Under this scheme, older Australians can use some of the profit from the sale of the family home to top up their superannuation.
Currently, people older than 65 years old who sell the asset can make a one-off contribution to their retirement savings of up to $300,000 (or $600,000 per couple). The budget has created a change that will lower the age threshold to 60 years from July 2022.
My prediction is that those in the age bracket of 60-65 will fast track their plans, and we will see an increase in property being offered for sale at this time. I also see there being an increased demand for downsizer style properties such as townhouses due to the scheme update, and with this, competition increasing, which will have a positive influence on pricing.