Since the 18th May when the Liberal Party were elected as the preferred party in the Federal election. There have been discussions among the real-estate community that agents have experienced an increase in call enquirers and traffic through home opens and display homes. We believe this is because prior to the election there was a lot of uncertainty as to if negative gearing would be abolished and if capital gain tax would be reduced. Both of these policies if introduced would have had a negative impact on our market overall in the short term.
So since these policies are not supported by the Liberal Party many investors who were sitting on the fence are feeling more confident in the market. Liberals first home buyers’ incentive has also meant that more first home buyers will be entering the market with Government assistance in which a deposit of 5% is required to enter the market as opposed to 20%. This will be capped per year at 10,000 loans.
There has also been an introduction of from Keystart which will take affect from the 1st July 2019. This has meant an increase in income limits for low deposit home loans. The increase will mean that people earning up to $105,000 pa potentially can qualify, this is an increase of $20,000 on previous limits. Couples now have also increased to $130,000 and families to $155,000.
APRA has also provided a reduction of the 7% interest rate test. Meaning more people could meet the serviceability requirement to get a loan. In the past this has been an issue for those wanting to enter the market although interest rates are at record lows the banks are applying a 7% serviceability calculator to ensure the loan can be paid off. Instead it is now recommended that a 2.5% buffer rate be used for this calculation meaning that more people could potentially qualify for a loan.
Looking at the data from REIWA during the past two weeks from May 26th– 2nd June stats we are seeing some positive signs. What we are wanting to see is the number of properties on the market decreasing and the number of sales increasing. You will note that in this week sales volume has decreased by 381 properties and sales volume has increased by 65 properties.
Yesterday Interest Rate cut of 0.25% is also a positive sign for our markets as it means that overall people will have extra income to spend, whether they can spend it on clothes, food, travel, savings etc… These funds that will be distributed back into the economy which in turn can have an impact on the overall confidence and economy.
Confidence and sentiment can and do have a major impact on our property market. With all of the above changes I believe we will start to see some positive market activity. Remember though that although the overall market may be trending in one direction it does not mean that all areas will increase. We still have very much a two tiered economy and so some areas will continue to feel downwards market pressure.
If you would like to learn more about current trends in our market and the indicators supporting this, reserve your seat at our next monthly seminar!