Markets in ‘healthy’ state despite change: PIPA

The executive of the national real estate body said that while the market is entering an era of flight to quality due to easing conditions, homebuyers and seasoned investors are able to understand and adjust to the central bank’s decision to raise interest rates following their emergency pandemic-induced lows.

The Reserve Bank of Australia (RBA) raised the official rate by 0.25% in May and 0.50% in June as the regulator seeks to rein in inflation and get the economy back on track.

Ms. McDougall downplayed the significance of the scare stories surrounding recent rate hikes.

“[In] In all my years of reporting on real estate markets and economic metrics, I don’t think I’ve ever seen such outlandish commentary about interest rate increases as the ones that occurred in May and June,” Ms. McDougall commented.

Commenting further on the Reserve Bank’s recent monetary tightening, Ms McDougall said: “While, yes, the rate hikes are earlier than what the central bank had indicated, I don’t think any of us really want to believe that the cash rate would have to remain at such a low level urgently for several years.

“That’s because, if it did, it would mean our economy was in terrible shape, which would be a bad thing for all of us – rather than the opposite,” she said.

Ms McDougall said the strong performance of the banking sector indicated that new borrowers were financially stress tested by 2 or even 3 percentage points higher than the actual interest rate attached to their mortgages.

“This fact, along with the fact that most borrowers are well ahead of their repayments, means interest rate increases are nothing to worry about for the majority of mortgage holders,” she said. Explain.

The PIPA executive noted that the rising cost of living is leading to more hip pocket pain for most households, with the country’s inflation rate now 2-3 above target. % of the central bank.

But she pointed out that the central bank has indicated that it expects high inflation to be a temporary situation rather than a permanent one.

“Additionally, most major banks appear to be setting a maximum interest rate of around 5-6% within two years, which is still relatively low compared to historical averages,” she said.

Ms McDougall acknowledged that affordability constraints, coupled with changes in monetary policy, had calmed markets. She noted that this is most evident in high-end locations, where shopper activity has started to decline.

But she added that with more listings available and fewer buyers actively looking for a property, current market conditions provide an abundance of opportunity for buyers and long-term investors.

Markets in ‘healthy’ state despite change: PIPA

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Last update: June 29, 2022

Posted: June 30, 2022