What Low Interest Rates Mean For Sydney’s East

By May 9, 2018 No Comments

The RBA recently announced that it will keep the cash rate on hold at 1.50%, in line with our predictions for this year.

It’s now 20 months since the rate last changed and there are few signs the RBA has increases planned for the near future. Here’s a look at how these consistently low rates are affecting activity across the eastern suburbs.

The RBA’s decision: What it means for lenders

With such a long period of stability in the cash rate, regulators are now focused on whether lenders are providing responsible loans. In line with this, lenders are scrutinising every expense their client might have to find their real borrowing capacity.

Meanwhile, even though the cash rate remains steady, lenders are continuing to vary their rates with some smaller lenders offering rates lower than 3.80%. We’re also continuing to see different rates for owner-occupiers versus investors, and between principal and interest versus interest only loans.

Are lenders really contributing to Sydney’s ‘slowdown’?

At the moment we are seeing lower auction clearance rates across Sydney as a whole along with more approachable prices in a number of areas. While some commentators are quick to cite tighter lending standards as a key factor in this much-discussed ‘slowdown’ in Sydney’s prices, the fact is there’s much more to the story.

Taking a look at CoreLogic’s latest price data for units, for example, it’s interesting to note that units have actually increased in average value, rising 0.97% year-on-year by the end of April. And while house values are down 5.20% across the city, the month-on-month change is far less significant with a decrease of just 0.57%. This suggests that while prices may have past their peak, we may also be past the most dramatic decreases in value.

Our new focus on the sub-$1 million market

Those who know Sydney real estate understand that some locations operate almost independently of wider market movements. Nowhere is this more obvious than in the eastern suburbs, where median price increases continue to outperform the rest of Sydney by a significant margin.

So, rather than scale back activity, at McGrath we’ve recently decided to hold our first mid-week auction events, offering properties expected to sell for less than $1 million. While these auctions are open to all buyers, we know this price bracket is often particularly appealing to investors looking to capture property with the strong capital growth potential still offered in Sydney’s parkside and beachside locations.

Whether you’re planning to invest, buy or sell this year, understanding the unique landscape of the eastern suburbs is crucial. Take the time to check out our advice to investors, sellers and buyers, along with our eastern suburbs market snapshot, so you can make the most informed decision.

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