All eyes have been on the real estate market lately, as changes are anticipated, following the recent hike in the official interest rate.
The RBA made the long awaited move to increase the rate to 0.35 per cent, an increase of 0.25 per cent in May, after two years of the lowest interest rates in history.
And now a new Federal government has come to power.
So, what can we expect from the change?
Auction activity rates displayed a staggering comeback in the last week of May, in the wake of the election campaign, rising 105 per cent, with 1460 auctions held compared to 712 in the week prior.
Preliminary clearance rates rose one per cent, to 62.9 per cent, still significantly lower than the COVID19 flurry we saw throughout 2021 when Melbourne clearance rates were 71.7 per cent in the same week last year.
Despite this, the market is displaying strong resilience among factors that had been predicted to hamper its growth, including the first interest rate rise and the pinch of the cost of living.
Coming out of the lockdown era, and into an era of the Labor Party as government, has pushed issues of real estate and homeownership even further into the spotlight.
The pandemic unexpectedly pushed housing prices higher than ever, and now we’re looking to a Labor government to address the issue of housing affordability.
One of Labor’s most notable policy proposals in the housing sector is the Help to Buy initiative, where first home buyers are provided a path to homeownership through sharing the purchase price with the government and paying a reduced deposit of as low as two per cent.
CoreLogic’s research director, Tim Lawless notes that it will likely have an effect on the state of the housing market.
“Being able to share up to 40 per cent of the purchase price with the government, along with only a small deposit and opportunity to save on lenders mortgage insurance, helps to overcome several of the hurdles of homeownership,” he said.
“Having said that, a higher interest rate environment, which may see lower prices, could make people more cautious of buying, reducing demand for the scheme in the short term,” he said.
“Historically, residential transaction activity correlates with property price movements. Additionally, we have just been through a period of significantly elevated transaction activity, including from the first home buyer cohort, where many home purchasing decisions were likely brought forward to take advantage of the swathe of home buying grants and incentives over 2020 and 2021.”
REIV CEO Quentin Kilian acknowledges that the recent Victorian state budget indicates the strength of the real estate sector, but more needs to be done to maintain the sector as a strong performer in economic growth. He suggests that the current property tax model be reformed.
“Since last year’s budget forecast a further $3.3 billion in property tax revenue has been raised, underlining how significant a contributor the real estate sector is to the state’s coffers,” Mr Kilian said.
“Stamp duty is a tired tax that the Victorian Government continues to prioritise – the state needs a review of its old property tax regime so that all participants – first home buyers, owner-occupiers, investors and renters – can move forward with confidence.
“Political, business and community leaders should ensure there’s a focus on keeping Victoria an attractive destination for property investment and housing affordability and access. Anything less puts at risk our strong foundation, which will harm job creation and the economy more broadly.”