Your borrowing capacity, properties prices, and how they move together

All the talk over the past few months have been centered around inflation rising out of control, and the overall impact rate increases will have to households, peoples livelihoods and the prices of property. Here are some facts.

Since April - the average borrowing capacity has dropped approx 20-23%. More for some, less for others.

Repayments on loans have risen by a minimum of 25%. Some interest only facilities have gone up over 50%.

Rents are soaring, as landlords are passing on some of the increased costs to tenants.

But property prices have fallen on average 5-8% from their peak, with Sydney being down 0.50% in the last week, down 2.3% from last month, and 4.5% over the last year.

Auction clearance rates were revised at the end of the week 17/09/2022 to 59.7%, which was the highest clearance rate since May 22nd of this year, and down from the same period in September last year which had 75.1% of auctions successful. How does this correlate?

On average, most people looking at property have preapprovals in place, which are valid for 90days. This means it would take around the 3-6 month mark to see trends changing, as it does with banks, as their repayments aren’t always recast immediately (changed up or down when rates change) and most banks operate on a 3/6 month program of recasting peoples repayments.

This is the core reason we don’t see property prices jag up or plummet down with rate decisions, nor the inflation rate move sharply, as it takes months for peoples spending habits to change. This is where we now will see movement in property prices that is a result of months of change with RBA and subsequently bank decisions.

People in Australia currently fall into three categories, Investors, owners and hunters. All three have their own unique strengths currently.

The owners and investors have never been stronger in the market to renegotiate their current lending, to lower discounts and cashbacks - this is where your broker can help support you and your needs in this time.

Hunters - we have not seen for many, many years the amount of stock, and ability to negotiate prices due to supply outweighing current demand. Please reach out to see how we can help with property reports, negotiation/discussion with key stakeholders (accountants, real estate agents, buyers agents, conveyancers) to prioritise you and your needs in this current financial situation, we’d love to help you