Happy New Year!
I hope you were able to get a break to spend some quality time with your loved ones.
We’re very much back in the swing of things here at Peasy, and it’s certainly been a busy start so far. It looks like the initial shock of the rate rises has worn off and we’ve now moved to the acceptance phase. There’s no doubt that the rate rises are hurting, although wage growth and property value reductions are still making it possible for people to get into the market.
From a property price standpoint, I think property prices will largely start to stabilise. With an ever-increasing population and housing supply still not keeping up (if anything, it’s getting worse due to the cost of construction and many building companies going bust), it’s only going to keep competition high between buyers. If rates aren’t increased too significantly (which I don’t think they will), we may even start to see some recoveries in areas that are still deemed affordable. I realise my view is slightly different to what’s out their in the media, although my view is formulated based on the daily conversations I’m having rather than trying to give doom and gloom to sell newspapers!
One area I think will particularly do well is South East Qld (Bellmere, Morayfield, Caboolture, etc) mainly in the pockets surrounding Brisbane (as opposed to Brisbane itself which I believe is more sensitive to rate increases due to the median prices). The rental demand is unprecedented, and there is still a large amount of internal migration due to an increase in employment opportunities. The median income is increasing, so the affordable areas within an hour of Brisbane will still have some room to grow. The increases in rental income should also help those looking to invest there when it comes to cash flow.
Most state governments and the federal government still appear determined to help first home buyers into the market in the below-median price ranges as well, so I really do think that there’s an opportunity for investors and first home buyers alike to get into the lower end of the market and get some good returns. I really think that times like this are when the “lucky” people buy. Going against the tide and buying during uncertain times is usually more rewarding than waiting for everyone else to jump in. It is always important to assess your overall risk though, of course.
One of the most common questions I’m still getting is around choosing fixed vs variable, so I’ve recorded a quick (12-minute) video with some tips about what I think will happen with interest rates, as well as a live calculation of what may be the cheaper option based on varying fixed terms and current rates available in the market. In case you’re interested, you can watch it here
We also know that there’s a lot of concern from borrowers who are coming up to the end of their fixed rate. My suggestion is to start planning now and look at doing a budget to work out how the higher repayments will affect you. We have some really nifty budget planners I’d be happy to share with you, so just let me know and I’ll send it across to you. I also just want to reiterate that we will continue to proactively review all of our clients loans on an annual basis, as well as fixed rates as they come closer to expiry, and we’ve made slight adjustments to how we do these reviews and the information we provide based on feedback we’ve received.
Of course if you have any questions or need anything at all, please feel free to reach out. I hope you have an awesome 2023!
