In the midst of uncertainty both domestically and globally, the Reserve Bank (RBA) elected to pause the cash rate once again in July at the historic low of 1.75%. Analysts are broadly expecting another cut in August – a survey of 30 leading economists showed two thirds believe the cash rate will fall by 25 basis points next month, with a smaller number tipping a November change.
This is occurring against a backdrop of the shock Brexit announcement late last month teamed with the cliff hanger Federal Election which may take days or even weeks to resolve. While the Liberal Party have claimed victory, stating they are confident they will form a majority Government, a strong possibility of hung parliament remains.
Meanwhile, SQM research reported the number of properties for sale in Melbourne fell by 3.4%, which is consistent with a quieter winter season. Median asking prices have risen significantly over the past year, with the asking price for houses up by 15.6% and units up 6.4%.
The latest price growth index from CoreLogic RP Data shows Melbourne prices grew by 0.8% in June, bringing actual annual growth to 12.2%. This represents the highest annual growth of any capital city, with the second highest growth in Sydney at 11%. Analyst Tim Lawless said the continuing growth was surprising as it had been expected to level out this year. Regardless, many agents have reported increased speculative activity over the past quarter from investors based on the possibility that the election could result in changes to negative gearing arrangements and capital gains tax concessions.
In other property news, an important change has taken effect in the prestige property market. As of July 1, a withholding tax of 10% will apply to any property sales over $2million where the vendor has not supplied a clearance certificate to prove their Australian residency. The move is aimed at reducing the avoidance of capital gains tax by non-resident property owners. Further, the Victorian State Government has in addition increased foreigner land tax surcharge to 1.5% and stamp duty to 7% in its latest budget.
The changes are a key reason stated in a new report from HSBC which has predicted property price growth in key capital cities will halve over 2016. Chief economist Paul Bloxham said the foreign buyer taxation changes teamed with tighter lending standards and an oversupply of apartments will result in house price growth slowing to between 0% and 5% over 2017.
With a shortage of stock in many price segments and continuing healthy buyer interest, good opportunities exist now for sellers who may otherwise have been considering a spring sale.