Welcome to this edition of Property Edge, where we delve into the latest trends and insights shaping the Australian property market. In this issue, we explore the remarkable resilience of home prices over the past four years since the onset of the pandemic, the changing dynamics of property hotspots, and the latest updates from the Reserve Bank of Australia. Join us as we uncover the opportunities and challenges facing buyers, sellers, and investors in today’s ever-evolving market.

Unlocking Potential: Uncovering Hidden Gems in Australia’s Property Market

In a shifting real estate landscape, certain suburbs have emerged as hidden gems for astute buyers. A significant increase in property listings, coupled with a decline in searches, has created a unique opportunity in these areas. Suburbs like Belconnen in the ACT and Brighton in Tasmania have seen listings soar by over 100% and 62% respectively, while searches have decreased, indicating a potential buyer’s market.

This trend is particularly evident in cities like Sydney, Melbourne, Canberra, and Hobart. For instance, Alexandria in Sydney has experienced a 52% rise in listings but a 6% drop in searches. Similarly, in Canberra, suburbs like Turner and City have seen a substantial increase in properties for sale, offering buyers a greater selection, especially in the apartment and townhouse segment.

The shift towards more favourable conditions for buyers is attributed to several factors, including expectations of stabilising interest rates and an increase in distressed listings due to recent rate hikes. This has led to more properties on the market, providing buyers with more options and potentially better negotiating power.

In areas like Perth, Adelaide, and Brisbane, however, the demand for homes still outstrips the supply, keeping competition among buyers high. Nevertheless, in select suburbs where listings have outpaced searches, there lies an opportunity for buyers to find value and make a savvy investment in Australia’s ever-evolving property market.

Suburbs with Increased Listings and Decreased Searches:

• Belconnen, ACT: Listings up 109%, Searches down 14%
• Brighton, TAS: Listings up 62%, Searches down 11%
• Turner, ACT: Listings up 60%, Searches down 6%
• Claremont, TAS: Listings up 59%, Searches down 13%
• Bruce, ACT: Listings up 59%, Searches down 22%
• City, ACT: Listings up 54%, Searches down 12%
• Alexandria, NSW: Listings up 52%, Searches down 6%
• Templestowe, VIC: Listings up 52%, Searches down 6%
• Safety Beach, VIC: Listings up 52%, Searches down 11%
• The Ponds, NSW: Listings up 50%, Searches down 18%

Meanwhile, one of the driving factors for property prices, interest rates have undergone a change. If you were waiting for the first Tuesday of the month this week for the RBA interest rate announcement you would have been disappointed!

Transformative Changes at the RBA: A New Era for Interest Rate Decisions

The Reserve Bank of Australia (RBA) has introduced significant changes to its operations and decision-making processes this year, marking a new era in the way it manages monetary policy. These reforms, include:

• Extended Meeting Duration: The RBA will now hold two-day meetings, starting from Monday 2pm to Tuesday 9am, compared to the previous single half-day meeting on Tuesday.
• Board Involvement: Decisions will be announced in a statement from the board at 2.30pm on Tuesday, shifting away from the governor-only statement.
• Timely Communication: The detailed quarterly Statement on Monetary Policy, including forecasts, will be released on Tuesday, instead of the previous Friday release.
• Governor’s Press Conference: A press conference will be held at 3.30pm on the decision day, a new addition to the RBA’s communication strategy.
• Inflation Target: The RBA will target the midpoint of the 2-3 per cent inflation range, allowing for flexibility.
• Meeting Frequency: The number of meetings will be reduced to eight per year, every six weeks, compared to the previous 11 monthly meetings.
• New Roles: The introduction of a Chief Communications Officer, Sally Cray, and the creation of a Chief Operating Officer role later in the year.

Mid-year, further changes will include the separation of the board into two distinct entities: one for monetary policy and another for governance. Additionally, de-identified votes on monetary policy will be disclosed, and public appearances by board members will be encouraged, expanding beyond the governor, deputy, and assistant governors.

These reforms are poised to bring a fresh approach to the RBA’s operations, promoting greater transparency, accountability, and communication in its monetary policy decisions.

In light of these changes at the RBA, let’s delve into the bank’s latest monetary policy stance as revealed in the recent meeting minutes.

RBA’s Shift in Stance: No Further Rate Hikes in Sight

The Reserve Bank of Australia (RBA) has taken a significant turn in its monetary policy approach, as highlighted in the minutes from its March 18-19 board meeting. For the first time since initiating a series of 13 rate hikes in May 2022, the RBA did not consider any further increases, maintaining the cash rate at 4.35%. This decision reflects a more balanced view of economic risks, with the board finding it challenging to predict future rate adjustments.

Independent Economist Chris Richardson anticipates that the RBA will lower interest rates towards the end of 2024, with inflation expected to align with the 2 to 3 per cent target band by December 2025. Despite the current inflation rate of 3.4%, the RBA is cautiously optimistic, noting that the disinflation path in other countries has been uneven and may offer insights for Australia.

The board remains committed to returning inflation to the target range while preserving labour market gains. The minutes also revealed the impact of restrictive financial conditions on households, particularly those with lower incomes, as they navigate higher debt payments. However, defaults remain low, indicating resilience among borrowers.

Treasurer Jim Chalmers views the RBA’s latest stance as a “welcome development” for households, offering some respite from the rapid rate hikes. As the RBA’s next meeting approaches on May 6-7, it is widely anticipated that interest rates will be held steady, providing further relief to borrowers amid uncertain economic conditions.

Given that this time four years ago we all had our worlds turned upside down with the first wave of lockdowns it may be timely to look at what has happened in the world of property since then.

Australian Home Prices: A Four-Year Surge Since the Pandemic

Since the onset of the pandemic in March 2020, Australian home prices have experienced a significant surge, defying expectations of sharp falls during the pandemic and subsequent interest rate hikes. Nationally, prices have risen by 39.9%, influenced by factors such as supply constraints, population growth, building activity, rental market conditions, interest rates, and migration trends.

Over the past year, capital city markets have outperformed regional areas, with a 7.64% growth compared to 4.67% in regional areas. However, since the pandemic’s start, regional home prices have generally outperformed capital city counterparts, except in WA and NT. Notably, regional Queensland has seen the highest growth at 66.5%, followed by regional SA at 66.2%, Adelaide at 64.0%, and Brisbane at 63.1%.

The pandemic triggered a shift in housing preferences towards smaller households, space, and lifestyle, with less emphasis on proximity to CBDs. This shift, along with remote work trends and relative affordability, drove strong population growth and housing demand in coastal and regional areas, particularly in Queensland.

Interest rate hikes since May 2022 led to a sharp fall in home prices in many markets, with national prices declining by 3.84% and Sydney prices by 7.02%. Despite the higher interest rate environment, the housing market has entered a new cycle, with prices rising again and reaching fresh peaks in March 2024.

The rapid price increases during the pandemic and the recent upturn present challenges for first-time buyers, especially those with lower incomes. Housing affordability has worsened to its worst level in at least three decades, with the deposit hurdle increasing significantly due to rapid price growth.

Thank you for joining us in this edition of Property Edge. We hope our analysis and insights have provided you with a clearer understanding of the current state of the Australian property market and the factors driving its direction. As we navigate through these changing times, staying informed and adaptable will be key to making informed decisions in the property landscape. Stay tuned for our next issue, where we’ll continue to bring you the latest trends and insights from the world of real estate

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