Easter Discussions on Rate Movements

Easter is like Christmas in that we get together with family and friends and have some pretty in depth conversations that may trigger what we do for the rest of the year. This year Easter arrived early so those Christmas decisions may not have been enacted as yet. And these new discussions may alter or cancel previous decisions.

I sense that come conversations over Easter could trigger the continued elevation of property listings as sellers will be tempted given prices are up nicely. Many will be thinking it might be wise to get an upgrade happening before reduced interest rates spark renewed buoyancy. As mentioned in previous newsletters, reduced rates can improve borrowing capacity by tens of thousands.

It is also correct to say we might not all be out of the doldrums quite yet with distressed selling also likely to boost supply levels, as the home borrowers facing the so-called mortgage cliff reluctantly sell under the burden of higher interest rates. If you listen to economists, these high interest rates could be here for another 6 months. In addition, there is still a large portion of borrowers yet to come off the low fixed rates taken up a few years ago.

The Easter discussions were had as housing sits at the forefront of local, state and federal political debate. As the supply of new homes sits at the lowest levels in years, leaving the federal government impossibly short of its ambitious target for 1.2m new homes by mid-2029. As construction companies continue to collapse. And, as immigration levels remain at all-time highs.

Australia brought in a record 518,000 net overseas migrants last financial year. Data released recently showed a net increase of 55,330 migrants in January, the highest January intake ever recorded and more than double the 21,000 recorded last year. ABS data also out last week showed the country added a net 166,000 homes last calendar year, at the same time as the population grew by 680,000. So, we only added one home per 4.5 new residents. And that there, ladies and gentlemen, could be why we’ve got a rental crisis.

Last month, Westpac published a survey of 2,000 Australians and it showed that 44 per cent intended to buy a property in the next 5 years. We have a tight rental market, where young people and immigrants are considering buying earlier that they normally would. Combine all this with weak building approvals and we could see a growth in buyer demand in the next few months.

Some Easter conversations, like always, would have been on interest rates and borrowing capacity. There are still a lot of people who are still mortgage prisoners believing they are unable to refinance, unaware that some lenders have amended refinance buffers and criteria over the past 6 months making it easier for some to refinance. Other discussions would have been on when rates are likely to come down.

A pity that my crystal ball is like my IT at the moment, broken.

But the biggest discussion was about who scored the most eggs in the Easter Egg hunt.

Don’t leave it another eight months until your next discussion.

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