Australia’s housing recovery gains momentum in August

Interest rates continue to be a hot topic of conversation among commentators, economists and mortgage holders. There is cautious optimism that rates are approaching stabilisation with rates remaining unchanged over the last two months of the quarter.

National growth back in the black

The CoreLogic National Home Value Index reached a milestone over the winter period, clawing back loses over the last 12 months to grow by 0.8% in August. The National HVI rose for the sixth consecutive month in August since bottoming out in February with growth broadly recorded across the country, the rate of growth increased again in August after the previous two-month trend slowing capital gains.

While the upper quartile of the market drove growth earlier in the year, the nation’s slowdown in the growth rate earlier in the quarter was largely being driven by easing gains in this segment of the market. There was, however, resilience in the middle and more affordable segments of the market, thanks to a bounce back from first home buyers and investors in recent months.

What impact are interest rates having?

Eleanor Creagh, Senior Economist at PropTrack shares that “stronger housing demand and a limited flow of new listings hitting the market have offset the impact of interest rate rises” over the quarter.

She believes with interest rates are nearing their peak, this will likely sustain current market confidence and maintain the lift in home values. However, she cautions, “the full impact of recent rate rises is yet to be felt, and the potential for further tightening remains a headwind for the market.”

Spring starts with a bang

The strong winter momentum looks set to flow into the spring selling season. Spring is set to start with a bang, with PropTrack data showing that the number of auctions scheduled for the first week of spring is up 13% compared to the same time in 2022.

PropTrack economist Anne Flaherty believes the unusually high number of auctions could be due to sellers holding off selling their properties over the first half of this year and late last year, a general improvement in selling sentiment and confidence increasing amid signs that interest rates may have peaked.

The influx of new properties hitting the market could be good news for buyers working to alleviate some of the competition.

Dwelling values over the quarter

The national Home Index Value grew by 2.5% over the quarter, with Brisbane leading the way. Within the capital cities, house values rather than unit values generally showed a sharper recovery trend.

Sydney
Sydney grew 3.8% over the quarter, with the Harbour City’s ongoing recovery now placing dwelling values at 1.2% higher over the last 12 months. Sydney’s monthly pace of growth has increased to 1.1% in August, with the rental yield holding relatively steady at 3.1%.

Melbourne
The Victorian capital continued its steady growth with 1.6% over the quarter, growth slowing slightly in August compared to July. The rental yield unchanged in August with 3.5% returns.

Brisbane
Brisbane led the growth for the nation’s capital cities in August with 1.5% growth and increasing by 4.2% over the quarter. In Brisbane, renters can take note of the 4.2% gross rental yield in August.

Canberra
Canberra recorded an increase of 0.5% over the quarter. After a decline in growth in July, dwelling values rebounded to grow by 0.3% in August. The nation’s capital has a current gross rental return of 4.0%.

Perth
Perth saw a 2.9% jump in values over the quarter, building on its annual growth of 4.5% and recording a new cyclical high through August. One of the few cities to do so. Investors will be happy with the country’s second highest gross rental return (behind Darwin) at 4.9%.

Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (September 2023)

If you have any questions or need any information please give us a call on 039723 0522.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

A mortgage is a long-term commitment, one in which many people enter with a ‘set and forget’ mentality. Most loans are around 30 years – a long time in which many things can change, not just in your personal circumstances but in the financial world, seeing the introduction of new loan products and fluctuations in interest rates.

If you haven’t reviewed your loan for a while, now is a good time to consider whether it still suits your circumstances or whether you’re better off making some changes. It’s what many Aussies are doing, with the ABS reporting the value of owner-occupier refinancing of $13.4 billion last November.i

Reviewing your loan

It is a good idea to review your loan annually and there’s no better time than the present.

While this can seem like an arduous task, it doesn’t need to be complicated. Read back over your loan’s terms as a starting point. To ensure you’re receiving the best interest rate for your loan – and whether your loan is still fit for purpose – ask yourself a few things:

• Has there been a change in your employment status?
• Has there been a change in your family situation?
• Have your financial goals changed?
• Are there pressing matters that need financing (i.e. renovations, needing a new car, etc)?
• Are you wanting to invest or change your existing investments?

Knowing where you are standing financially can help you then decide whether it’s worth refinancing and chasing a better interest rate, or whether your existing mortgage is still working for you.

Types of refinance loans

There’s not just one type of refinancing, but many different types of refinance loans, including:

Rate-and-term refinance loan

This is where you replace your loan with a new loan that is the same amount, but at a changed interest rate and/or term. This is the most common refinancing option and often what people think of when it comes to refinancing.

Cash-out/cash-in refinance

A cash-out refinance loan enables you to access the equity in your home by taking out a new loan with a higher loan balance than your existing loan.

A cash-in refinance loan has you lowering your overall loan amount by contributing a lump sum – this is done by taking out a new loan less than your old loan, paying out the difference to close your old loan.

Fixing your interest rate

As opposed to a variable rate, a fixed loan guarantees a locked interest rate for a period of time (usually between 1-5 years). This is a popular option during a time of rate hikes. However, it can come with drawbacks such as not being able to take advantage of any rate cuts.

Split loans

As its name suggests, a split loan allows you to split your loan into multiple parts with different interest rates and terms. For instance, you could have part of your loan at a variable interest rate and another part as a variable rate.

Consolidation refinance

This is where you combine all your various debts into the one debt (including credit cards, car loans, etc) and therefore one repayment. This can make your debts easier to manage but can mean your short terms debts are stretched over the life of your new home loan.

Things to keep in mind

While (generally speaking) the goal of refinancing is to save money, there are a few considerations to be aware of, so you don’t end up paying more in your quest to save.

Refinancing can impact your credit rating, causing it to drop. However, it’s worth keeping in mind that this dip is short-term and shouldn’t have too big an effect on your credit score in the future.

Another thing to be mindful of is that you may need to pay Lender Mortgage Insurance (LMI) again. As LMI protects lenders, your original LMI payment won’t cover a new lender, which is why you can expect to pay this again. For most borrowers, you’ll need 20% of the property’s current value to avoid paying LMI again, keep in mind the value of your property may have changed since you first took out your loan. You might also need to pay LMI even if you stick with the same lender, but you’ll likely be given a discount.

There are also costs related to refinancing, such as application fees, discharge/break fees and valuation fees. Some lenders waive these costs or offer a discount, so be sure to ask what you will be expected to pay and see what you can negotiate.

You may also find that your bid for refinancing is rejected if you have accumulated too much debt or if your living expenses are now too high. Changes to your loan could also stretch out the repayment period, leading you to pay more in the long run.

Keeping on friendly terms with your mortgage

Whether you decide to refinance or stick with your current loan, by refamiliarising yourself with the conditions of your loan and assessing your financial situation, you’ll be better placed than if you ‘set and forget’.

Set a reminder to do this once a year – it can be easier to remember come the end of the financial year or the start or end of the calendar year.

You don’t have to go through the process alone. Give us a call on 039723 0522 to discuss your existing loan and circumstances and to chat about your future financial goals.

Stay up to date with what’s happened in Australian markets over the past month.

While the price of most goods and services continues to rise, the good news is the rate of increase is continuing to slow.

As a result, the markets are beginning to breathe a sigh of relief.

The ASX rallied to close the month on a positive note due to a combination of stronger than expected growth data, better than expected earnings and lower inflation.

Click here for our August update video.

Please get in touch on 03 9723 0522 if you’d like assistance with your personal financial situation.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

At present, and over the coming months, there will be road and railway works taking place in the vicinity of our Croydon office. These works include level crossing removal and replacement of the Croydon railway station and may result in some disruptions and detours from time to time.

But rest assured, we will be open, and you will be able to visit us!

We will let you know of any known impacts when appointment bookings are made, but it may be prudent to call us on the day and check the state of play. Nevertheless, it would be a good idea to allow a little more travel time when visiting us over the next 6 months.

If you’d like more detailed information regarding the works they can be found here.

Or via this useful interactive map.

Thank you for your patience!

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.