The Reserve Bank’s decision to leave the cash rate on hold at 1.5% was widely predicted, but despite a lack of official movements, lenders hiked rates again throughout April for both investors and owner occupiers.
Interest only loans were the hardest hit, with rises of up to 30 basis points. Banks said the increases were a direct result of “recent regulatory changes” that have seen some lenders now requiring deposits of up to 30%. But several commentators hit back saying lenders were only using the opportunity to repair or increase their margins.
Regardless, the latest Hedonic Home Index from CoreLogic RP Data has recorded a significant slowdown in house price growth, with the Sydney market remaining flat in April. Melbourne property was the star performer with 0.5% growth, resulting in a cumulative 15.3% increase in prices over the past year. According to the researcher, 46% of all lending in Victoria is to investors, with signs lending to this sector is now softening as a result of the recent tightening.
But expert Louis Christopher of SQM said consumers shouldn’t fall for the “propaganda” that claims Sydney and Melbourne markets have cooled, as all other available data actually contradicts the RP Data report. Christopher said he believes the market is still booming, to the point where the regulator APRA will be forced to step in later this year. SQM calculated asking prices for houses in Melbourne actually rose by 1.1%, with falling numbers of listings probably a sign that vendors expect prices to rise even higher. According to the SQM data, the number of properties for sale in Melbourne fell by 15.2% in April, with listings now down by 23% over the year.
Going forward, the debate between commentators as to the likely future performance of the market continues to run hot, with Citi the latest to grab headlines with its prediction of a 7% fall in house prices in 2018. Their 47 page analysis said Melbourne and Brisbane apartments would be hardest hit due to an oversupply.
In reality, auction clearance rates remain stubbornly high in Melbourne with no sign of a winter slowdown. For vendors who’ve been considering a sale, current conditions are ideal with heavy competition from buyers resulting in some outstanding sale outcomes.