October 2022 Newsletter
Welcome to our October newsletter, looking at the Victorian Dining and Entertainment Program, updates on interest rates, the property market, and the recent trend in property clearance rates.
Victorian Dining and Entertainment Program
The Victorian Dining and Entertainment Program is back! Individuals can claim up to $125 back and can be made over multiple claims. All you need to do is spend more than $40 on dining or entertainment services across Victoria and you can claim 25% back.
The Victorian Dining and Entertainment Program will run until the $25 million fund is exhausted or 11:59pm Friday 16 December 2022.
For more information on the program, or to make a claim follow the Link
Interest Rate Update and Forecasts
The Reserve Bank of Australia (RBA) has again lifted the cash rate by another 0.25 basis points (bps) at its October meeting, the sixth consecutive hike, taking the cash rate to 2.60%. The smaller rise of 0.25% (rather than 0.50% from previous months) is likely an indication that we near the end of this tightening cycle. With global commodity prices falling, a budget that is expected to tighten fiscal policy and slowing growth rate the 2-3% CPI target that the RBA is chasing may come sooner than initially expected. More info here.
CBA was the only one of the major banks to have predicted this smaller rise, but it does acknowledge there is likely to be a few more increases to come in 2022 and early 2023. Link for more information.
Property Market
October’s rate hike will further impact the housing market as it will reduce maximum borrowing capacities, putting more pressure on the property market and driving prices down further.
The impact on the maximum borrowing capacity for a typical borrower has been huge, with the last 6 months of rate hikes reducing borrowing capacity by around 20%. And if the cash rate reaches 3%, maximum borrowing capacities will be reduced by close to 30%. Buyers having lower borrowing power means they can’t bid as high, resulting in a softening of the property market.
For those looking to buy, it is particularly important that any pre-approval is revaluated at the end of the pre-approval term to ensure your borrowing capacity and reset your budget if need be. Link to article on the impact on housing market.
House prices rose dramatically during Covid lockdowns compared to other types of properties as people prioritised more space, combined with extremely low interest rates making it cheaper to borrow more.
As rates have increased, house prices have begun to fall across the country. According to PropTrack’s Home Price Index, house prices have fallen by 3.6% nationwide since March, whereas unit prices have declined by 2.6% from the February peak. Link to article on property prices.
Source: PropTrack
Clearance rates
The uncertainty in the market has also negatively impacted the clearance rates in Melbourne over the last six plus months, with clearance rates being significantly down compared to the same period last year.
What are clearance rates? Clearance rates are the percentage of properties that were sold at auction over a given period.
Clearance rates have been down all but two weeks over the last six months when compared to the same period last year. The average clearance rate over the last six months is 58%, down 12% on the same period last year.
Source: Domain.com.au
Clearance rates are down across the country, with all major cities down 10 – 20% from February 2022.
Source: Corelogic
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.