Our best month yet: Confidence restored in the housing market with interest rate cuts and relaxed rules around borrowing capacity

Overview

• Our office achieved an impressive total of 12 sales this month (on and off market)
• 6 properties leased by our office this month
• Auction clearance rates in Sydney sat in 70% vicinity
• Interest rates hit a historic low of 1%
• Standard variable mortgage rates dropped
• Sydney property value rose 0.1%
• APRA made regulatory changes which significantly increased borrowing capacity
• Banks continue to ease their mortgage lending rules following APRA’s regulatory changes

Market changes and DIB CHIDIAC performance

If the positive changes that July has brought are any indication of what we can continue to expect for the Sydney property market, then buyers, sellers and agents alike are all smiles. The stability within the federal government, along with the removal of uncertainty surrounding potential changes to capital gains tax discounts and negative gearing has brought about genuine certainty and confidence in the market, which has been definitely felt on the ground at DIB CHIDIAC.

In Sydney, property values rose by 0.1%, marking the first increase the market has seen since June 2017, and we’ve achieved our busiest month ever, accomplishing an impressive $18m+ in sales despite a noticeably low property supply in comparison to buyers, who are out in numbers.

10 properties have been sold at asking price, or above their price guide, and Sydney auction clearance rates of 70% presents a useful guide to gauging the increasing strength of buyer demand and the growing property market.

Our days on the market this month and since the beginning of 2019 continue to be significantly lower than the average of other agencies, with quality family homes still retaining the frontrunning premium sales title, as they become available. On the leasing front, there was great success in terms of volume and diversity with 6 properties leased, ranging from apartments, duplex/townhouses and high-end waterfront homes in the inner west.

Important changes impacting property this month

Interest rates

• The Reserve Bank of Australia (RBA) has reduced interest rates twice since June, to a historic low of 1%. Experts are still predicting another cut later this year, and possibly one more at the start of 2020.
• The big banks followed suit, passing on between 80-88% of the two RBA rate cuts. Currently very little separates the 'big four' standard variable mortgage rates, which range from 4.92% to 4.98%.

Regulatory changes

• The Australian Prudential Regulation Authority (APRA) confirmed it would remove a rule introduced in late 2014, which had meant new mortgage customers were assessed on their ability to manage repayments within a minimum 7% interest rate.
• In doing so, it has removed a key constraint on borrowing limits that was put in place during the property boom in 2014. This change is effective immediately.

How does this impact you?

• Individual borrowing capacity could increase by about 10% or more.
• Analysts have estimated that a household on an average income could borrow up to $77,000 extra from a bank.
• An average full-time worker could borrow up to $66,000 more.
• The maximum loan available to a hypothetical household is estimated to be $636,000.

Banks and mortgage lending

• The big banks are all easing their mortgage lending rules and amending their home loan serviceability assessment policies following APRA’s regulatory changes.
• Over July, the following banks announced these changes: ANZ, Westpac, the Commonwealth Bank, NAB, Macquarie, Suncorp, MyState Bank, Bendigo and Adelaide Bank, the Bank of Sydney, as well as a number of other, smaller credit providers.