Chapter 1: What are the current trends in the Australian real estate market?
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 iHeartRadio and also Spotify and Apple Podcasts or wherever you get your podcasts from. Well, I trust your weekend is going well on this Sunday morning, the 10th of July for 2022.
Because it is the weekend, the RBA can't sneak in a rate rise hike because it really has got to that, hasn't it? Meaning that you wake up on a weekday and wonder whether today is the day that you will have to find more money for your mortgage repayments as a result of a 25 or 50 basis points rise.
At least in the weekend, there are two days that you can somewhat relax a little, and probably also immediately after a rate rise like last week, knowing that another rate rise is probably coming in another four to five weeks.
Chapter 2: How are rising interest rates affecting mortgage holders?
You know, mental health, we've talked about this before on the podcast. It's a real factor in the equation of people now living in a rising cash rate environment. It's all about consolidating your position and fighting on, bloody fighting on in some cases, and surviving this barrage of financial instability and uncertainty. And I'm sure...
that already this weekend there's been many, many roundtable discussions with families up and down the country talking about how they're going to navigate through this moment. And it's not an easy time. And if you know of somebody who has mortgaged themselves heavy to get into their first property experience,
Chapter 3: What is the importance of mental health during financial instability?
especially just being a good friend to talk to and letting them vent off to you will be unbelievably beneficial for them because you need your mates in times like these. And whether you realize it or not, your mates will be hoping for some understanding and support from you. So don't be backwards in coming forward. See how your mate is getting on this weekend.
Grab your coffee and switch on your real estate breakfast every weekday morning from 6.30.
Chapter 4: What new apartment developments are emerging in Batemans Bay?
It's the main centre forecast with propertybuyer.com.au. And let's take a look at your weather around Australia. First, we go to Sydney and the showers.
Chapter 5: How has the median house price changed in the last year?
They're back with a high of 17 degrees this morning. Melbourne, a cloudy Sunday but should be a mainly dry day. That's the good news, 15 degrees. Brisbane expecting fine with blue skies and 20 degrees as your forecast top and in Perth today expect the showers to ease and your high of 18 degrees.
From first home buyers to property investors and everything in between, every morning on The Real Estate Podcast. It's your real estate weekend podcast in review. What about people that are thinking about possible apartment living? There are several new apartment developments going on right now.
Chapter 6: What is the impact of stress testing on new borrowers?
There are. There's been a really big demand for apartment living, particularly within the centre of Batemans Bay CBD. There's quite a few, one that's just about open for occupation. And then there's a few that are being sold off the plan at the moment. And then there are others that are under construction.
So there's been a very high demand for that convenient apartment living in the centre of Batemans Bay CBD. And Sarah, the median house price growth, what has been happening? What's been going on over the last 12 months? Oh, it's been so exciting seeing the growth in this area. There's been a really big range. In and around the Batemans Bay CBD area, there have been some increases up 35%.
But when you're looking more so out at the real beachside suburbs in and around our area, Malua Bay, Browley, a lot of those areas have seen increases of 50% over the past 12 months. We've had a few properties that actually have sold within a 12-month period that have doubled what they paid for the property earlier. Enjoy your morning coffee.
Chapter 7: How does Perth's property market compare to the rest of Australia?
It's your real estate weekend podcast in review. Is there too much do you think being made right now of the raising rates environment? This balance seems to be missing in a lot of the commentary out there. I think people have seemed to have forgotten that the reason why rates were at emergency lows was because it was an emergency and we had that cash rate of just 0.1%.
So the reserve cut the cash rates, interest rates fell because of that to protect the economy and to protect people. homeowners mortgage holders at the time and now that we're sort of starting to see those interest rates increasing in my personal opinion there seems to be a lot of alarmist commentary out there when rates are actually moving off an emergency low which is a good thing.
And Nicola just how important is it for new borrowers right now in the moment in time that we find ourselves to be financially stress tested by the banks to build and I guess a little bit of that safety net? Exactly. I mean, banks, you know, the banking system in Australia is very robust.
And the reason why it is that way is because borrowers are always, you know, stress tested when they're going for a loan on a percentage that's much higher, you know, an interest rate that's much higher than the current rate that they might be paying. And that's generally two to three percentage points higher.
So anyone who probably got a loan in the last couple of years was probably, you know, banks were probably using an interest rate of about 5% at least to determine, you know, their serviceability.
So that's why I believe that some of the alarmist reporting that's out there in the headlines is not really reflective of the good work that lenders have done over the last, you know, two years to ensure that borrowers can afford the mortgages that they're taking on.
How relative is the RBA at this moment of time with a maximum interest rate of around 5% to 6% within two years compared to historical averages of years gone by? in a quite a low interest rate environment all the way back to the GFC. So 2008, which is a long time ago now, you know, 14 years we're talking about.
So we actually have had reasonably low interest rates from that period of time around about, you know, anywhere from sort of 5% to 7% prior to COVID. You're probably, you know, pretty happy if you had an interest rate that had a 3% in front of it.
a three or a four you know that was a pretty good interest rate so we have actually been in an elongated period of low interest rates with around about five percent being the norm which many of us were paying uh pre-covered so we're heading back perhaps to a period that we were in prior to the pandemic hitting our shores so that's why it's important for people to have some perspective
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Chapter 8: What factors are influencing the return of expats to Australia?
So what has been happening in Perth from where you sit over the last couple of months with everything that is going on? We've got a very, very tight rental market, as is the case in many parts of Australia. Our vacancy rates somewhere around about 1% and our rents are rising very strongly. So that
That's pushing tenants into the market, along with investors actually getting, for the first time, some reasonable yields on their purchase. And Perth prices, the average yield is around about 4.4% growth. So it's about the second highest in Australia. So very strong yielding. And what's happened, though, is we're having a real patchy boom.
So we've seen areas like Cottesloe just leapfrog, top end of the market, leapfrog. $200,000, $300,000, $400,000 in each sale and just all of a sudden put on somewhere between 15% and 20% in a very short period of time. That then has a knock-on effect to other markets. And now it's hitting the lower end of the market.
And some sectors like, you know, the Kingsleys of this world, which are just average type areas, well located, built in the sort of the 80s and 90s, but they're around median house price or slightly above. They are really being bought up really strongly and there's buyers waiting for those properties.
And you're anticipating a recession, I saw, within the next 18 months, but you are predicting Perth property prices would fare a great deal better than the eastern states. So tell us a little bit more about your thinking in that respect for Perth. Yeah, well, I mean, Perth went into the GFC at the equal highest housing prices in Australia.
They were equal to the Sydney median at that stage, which is around $500,000. So, hence, we went into about six or seven years of real financial pain after that because we were well and truly overvalued after the commodities and resources boom that we had in the late 2000s. Longer term, Perth should be somewhere around about the fourth highest. It tends to sit in that sort of level.
Now, to get back to fourth highest from where we are at the moment, we need an increase in value of just over 20% just to get back into fourth place, which is what they call a reversion to mean. So we go into this downturn. When I say downturn, doubling of interest rates doubles the cost of housing and decreases borrowing capacity significantly for all buyers or all owners.
And so therefore, it has to have a detrimental effect on prices over the time. We've seen this happen two or three times before. We'll probably see it happen again. But Perth housing prices at the moment, if you look at the Reserve Bank formulas and you put in the stats into the Reserve Bank formulas, it shows Perth housing prices currently about 10% undervalued.
And just before I let you go, Gavin, some are forecasting WA's strong market conditions are going to last for some time, largely fuelled by the state's strong economy. Yeah, well, it's going to be really interesting to see because when we had the economy firing on all cylinders before, we had very strong international migration into Australia, into Western Australia.
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