After a subdued few months for Melbourne’s property market, a number of recent events have seen a quick and sudden shift in market sentiment and activity.
Following the federal election, economists are predicting that the Coalition’s victory will mean a shorter and smaller market downturn than they’d expected. Labor’s proposed reforms to negative gearing and capital gains tax had seen many buyers – and particularly investors – hitting pause on their purchase plans until the outcome of the election was known.
Though it’s been just over a week since Scott Morrison’s government was elected, across our network, we’ve already noticed an upswing in buyer enquiries now there’s certainty that Labor’s proposed changes won’t be going through.
The market certainty that the election result delivered was further boosted when bank regulator APRA proposed lowering the minimum interest rate serviceability buffer from 7%. Since 2014, APRA has required banks to calculate loan serviceability against either a 7% interest rate or a rate 2% over the loan’s actual interest rate, whichever is higher.
The APRA buffer was introduced with the intention to dampen soaring housing prices and rapid growth in investor loans, however, in his announcement, APRA chairman, Wayne Byres, acknowledged that “the gap between the 7% floor and actual interest rates has become quite wide… possibly unnecessarily so.”
Removing this buffer requirement would allow the banks to set their own minimum assessment rates and mean that customers taking out a new home loan would be able to borrow thousands of dollars more than they were entitled to during the past four years.
Paired with signals from the Reserve Bank that they’re expecting to further cut the cash rate from its record low of 1.25%, most are tipping this trifecta of changes will slow or halt the decline in property prices. While some buyers will continue to sit back and monitor the market in the hopes of picking the low point, many are sensing plenty of opportunity in the short term.
Across the Greg Hocking network, we’ve seen a surge in activity from both buyers and sellers. Investors who have been keen to add to their portfolio with prices down – but reluctant to pull the trigger with the prospect of Labor’s changes hanging over them – have come out strongly.
We’re also speaking with plenty of clients who are interested to understand if a higher borrowing capacity may allow them to buy into an area they’d previously been priced out of. Vendors are also coming out of the woodwork, keen to take advantage of a boost in buyer activity.
If you’ve been waiting on the sidelines for a while now and are wondering if it’s time to make your move, it’s definitely worth understanding where you stand against this backdrop of changes. Ask your bank or broker for a reassessment of your borrowing capacity; and if you have pre-approval, check whether you’re now able to access a larger loan – it’s good to know where you stand from a finance perspective, even if you’re not actively looking.
Speak to your local Greg Hocking office too. Our team can take you through local market conditions, help you to identify the best way forward and support you with getting your ducks in a row for whenever you’re ready to move.