Chapter 1: What are the current trends in mortgage interest rates?
it's the real estate podcast across every state city and town of australia and welcome to another episode of the real estate podcast available on iheart radio and also spotify and apple podcasts or wherever you get your podcast from It is a Thursday, the 16th of June for 2022.
And coming up in just a moment, we're talking with Alice Stoltz, Domain's National Managing Editor, about mortgage interest rates and what your mindset could be towards them to help navigate through them. So it's an interesting conversation coming up in just a moment. And I see that monkeypox has spread to Western Australia with a person infected with the disease.
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Well, whichever way you look at it, the rise in the cash rate is here to stay for a while, isn't it?
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Chapter 2: How can first home buyers navigate rising interest rates?
How do you fight against it? What can you do to improve your anti-mortgage rate rises that have been unleashed? Well, sadly, many would say probably nothing, zero, zip. Just a classic example of a homeowner being squeezed because of the runaway inflation rate. Well, suck it up, people are told. Get on with it. Yeah, easier said than done.
Well, the other day I was reading an opinion piece by Alice Stoltz, Domain's National Managing Editor, And she said the RBA left no room for ambiguity. Interest rate rises ain't over yet and there are certainly more to come. We have come out of a property cycle that has seen extraordinary growth. Last quarter, Australia's national medium house price was over $1 million, up 18.4% on year.
However, now the party's clearly over. Alice goes on to say, but the fact we knew a further rise was coming doesn't make it a less bitter pill to swallow. She says, I'm endeavouring to find some bright spots in what feels like a dark cloud. Well, that seems like the appropriate moment to bring Alice into the conversation. Good morning, Alice. Great to have you back on the show.
Good morning, Craig, and thank you for having me.
Sounds like you're kind of thinking a little bit less negative thoughts around rising interest rates, which is good.
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Chapter 3: What mindset shifts can help during economic challenges?
And you've got some pointers for people. And the first one is first home buyers. You say, now it's your time.
Look, that's right, Craig. I kind of got through the end of a bit of a vicious media cycle last week where every morning I was talking around this sort of terrible scenario of rising interest rates.
And it sort of brought me back down to earth by the end of the week when I reflected on the fact that, you know, a month or so ago, we're all scratching our heads wondering how we're going to tackle this. The fact that so many first home buyers are locked out of the market.
And I just, I suppose what this came out of is this desire that we all want to change things, but no one actually wants to do anything. And I suppose I think one of the most fundamental issues at the moment for most people is the fact that first home buyers are firmly priced out of the market.
To me, we need to remember that with a rise in interest rates, we will also see a decline in house prices, quite simply because people have got less money to spend on those houses and have got less access to credit. So I suppose what I'm trying to say here is that while it can be very hard for homeowners, we now need to think of future generations.
And that is really those first home buyers who need all the assistance they can get to get a leg up onto the property ladder.
What? Think of other people. Think of other generations. I mean, that's the thing with property. It's so selfish. People just think of their own sort of needs and wants.
It's extraordinary, isn't it? And I think as a nation, it does sort of make us do a bit of soul searching about who do we want to be?
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Chapter 4: How do rising rates impact property prices?
Do we want to be those people that just think, I'll just think about myself. I won't worry about my children or my children's children. It's a lot of kind of deep cultural reckoning I think needs to take place.
Alice, you're sounding very hippie-ish this morning. I didn't know we were going there at all. But yeah, I mean, if we bring it back to what you're saying, it is a little bit hippie-ish. You know, we should be thinking about exactly what you're saying about other generations. But unfortunately, property is a very, very selfish sport.
Well, and I think that we know that for nearly everybody, property is their biggest asset. So I do also think that I'm not sort of kind of trying to be too sort of socialist here, but I do think there's a benefit to people owning a lodging that they can live in for their whole life and then living off it into, you know, in their retirement potentially. So I think it's going to impact the
There are many countries in the world who are doing this, and I think Australia for a long time has really just focused on our own personal wealth without actually thinking around how are other generations going to have what many generations have had before them.
Yeah, no, I'm with you. I'm in your corner. Another point that you raise is cut your cloth to the market we're in. Tell us a little bit more about that thinking.
Well, I think it's a very easy reaction to have when you hear about interest rates rising of saying, gosh, you wouldn't want to be a seller now.
But we have to remember, if you are a seller, and I'm not talking about people who are selling because of mortgage stress, I'm talking around potentially about a vendor who's owned their house for eight years plus or something and is moving for whatever reason that may be, death, divorce, new job, a lifestyle reason. they're going to be buying and selling in the same market.
So if they're selling their house tomorrow, they may get 10% less, let's just say in a relatively extreme case, than what they would have got a year ago.
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Chapter 5: What should sellers consider in today's market?
But they're also going to be buying their new house for that probably 10% less as well. So I think when you're transacting in a similar market, it isn't really as stark and painful a difference in prices as what one might initially imagine.
Yeah.
Yeah, and soul-searching is another point that you raise. You say that of all things Australia is known for, do we want to be a country that tops the chart for having some of the most unaffordable cities in the world? I don't know whether Mr and Mrs Joe Average can do much about that.
Well, I suppose that was what I was saying earlier on here, Craig, is that I just think as Australia, part of the Australian dream was created because immigrants in the 50s could move to Australia and buy a quarter acre block and have affordable housing. Whereas we talked recently around this survey that came out that property in Adelaide was costing more than an apartment in New York City.
And I think, you know, 10 years ago, cities like Tokyo, London, New York, et cetera, had some of the world's most expensive real estate. And Australia is now in that league. And I suppose, again, as a nation, is that what we want to be? Because it's just such a stark turnaround to what we were as a country 50, 60, 70 years ago.
Yeah. And people should be tightening the purse strings. That's another one of your points with your opinion piece.
Yeah, I think on that point around having to sort of rein things in a bit, I suppose, and tighten our belts, I suppose when people said, oh, we're so shocked by these interest rates, you know, I mean, the fact that APRA last year went into the banks and said you need to change the servability buffer when you're assessing a home loan and adding another 3% on top of it, I think really...
I know it's easy to see these things in hindsight, but really all indications were there that this was going to happen. And if people didn't heed that warning, I suppose I think there's a bit of irresponsibility in that on the minds of those buyers who were buying and weren't baking rises into their final figure.
And I feel like there was so much messaging about it, but some people put their head in the sands and said, I didn't know this was going to happen. And it's like, you really have to be prepared for that.
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Chapter 6: How can Australians prepare for future interest rate hikes?
We're not talking about sort of
you know trading party pies and for 10 tax here this is property and it will be your biggest investment yeah baking it in that's exactly what they've got to do and you're right there are people and i guess because it's a generational thing we've got this whole generation that has never seen the interest rates climb they've only ever been coming down so that fundamental thinking of bake it in it's like you know you might as well go to mars for that sort of thinking
But I think also, though, this idea that you should anticipate a rate rise at some point in the time you'll own your home. And the same way that you perhaps should anticipate that you might not, for whatever reason, work for eight months or a year. You might take extended maternity leave or you might fall ill or you might think, gosh, I just need a break in time out of the workforce or something.
You know, like really, if you're managing your finances efficiently, you will have that sort of bit of savings tucked away for a rainy day. And we know that during the pandemic, you know, Australians saved, many Australians saved a lot of money during the pandemic.
So I suppose we're sort of seeing a few different levels of people here, those who really overstretched themselves and bought at the top of the market and potentially didn't bake that rate rise in are the ones who are really going to bear the brunt of this latest rate rise.
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