With transaction numbers in the Canberra Real Estate market falling significantly over the last 12 months, (number of sales) and the number of new listings hitting the market rising, the pendulum of supply and demand has swung the way of buyers for the first time in many years.
Buyers are coming to view properties for sale armed with the mantra “you know it’s a buyers’ market out there”, and attempting to bargain accordingly.
History suggests that may not be the case, with increased competition on the horizon as mortgage approvals typically rise in response to falling interest rates.
At its May meeting the RBA took the large step of cutting interest rates by 50 bps. This wasn’t unprecedented, but was certainly a bold move in recognition of the two speed Australian economy and the ripple of uncertainty running through the global marketplace.
The Westpac Weekly reports that the market is currently pricing as a 100% probability that the RBA cuts another 100bps by the end of August, starting with a 73% chance of a 50bps cut at their June meeting, and whilst the banks probably won’t pass on all of that (on average home owners received 36bps from the official 50bps move in May), homeowners will be better off.
With the ABS reporting the average mortgage in the ACT is currently $289,000, assuming the bank’s pass on another 36bps of the likely 50bps cut, that 72bps reduction in home mortgage rates means in just 2 months the average home owners repayment will have reduced by $40 per week, or $174 per month. Over a 12 month period that’s just over $2,000 and with the prospect of additional cuts to come investors won’t be able to resist for too much longer.
We can’t be certain what the European uncertainty has in store for us, or that the RBA will take another 50bps off the official cash rate this month, but what we do know that the International Monetary Fund’s most recent update stated that it expects the Australian economy will outstrip growth over all other advanced economies over the next two years. Even if that just means we are the best of a bad bunch, with our low unemployment, high wages and vacancy rate of around 1%, Canberra is well placed to attract investment dollars into our housing market which will keep buyers on their toes.
Anecdotally we are already seeing evidence of this, with interstate enquiry on property for sale with Ray White Belconnen on the rise, and some properties recently attracting over 30 inspections to the first open home and selling after 1 week.