What The New Government Means To The Property Sector?
Happy Monday,
What a week ! Following on from the weekend election, last week's report focuses on the Labor party's major property policies. In addition to this we look at HTW Valuers latest monthly report for the month of May 2022 and we also dive into the RBA's latest findings which suggest interest rate increases will be front of mind for the remainder of 2022 with a 0.40% now likely in June.
We start with Saturday night's election result and Labor's major property policies. Let's start with the shared equity scheme..
Labor's main housing policy was a new "shared equity scheme", that would see the government essentially buying 30 or 40 percent of a property with the new homeowner.
That percentage of the property could then be bought off the government by the homeowner over time.
Labor committed to creating a regional housing scheme with 10,000 places a year.
It also suggested the price caps on houses were too low and committed to reviewing them immediately if elected.
Labor also promised to create a $10 billion Housing Australia Future Fund, with the returns on investment being used to build 30,000 new social and affordable houses, some of which will be allocated to frontline workers and women fleeing domestic violence.
Labor also said it would match the Coalition's proposal to lower the age at which people can put money from selling their house into super to incentivise people to downsize.
Labor's shared equity scheme further explained. Please see below.
Labor's Election win - What it means for property investors. Please see below.
News.com.au released an article this week discussing looming interest rate rises including the likelihood of a 0.40% rise in June. Please see the full article below.
Interest rate nightmare tipped to worsen as central bank confirms ‘more hikes are coming’
The Reserve Bank of Australia has warned that more interest rate hikes are on the horizon, as Australia’s economic crisis ramps up.
On May 3, the Reserve Bank of Australia announced the first official interest rate hike since 2010, revealing it would lift the cash rate by 25 basis points to 0.35 per cent from 0.1 per cent.
The historic rate rise was announced in response to skyrocketing inflation, which has reached an annual rate of 5.1 per cent and has sent prices climbing at the fastest rate in two decades.
It also marked the first rate rise during an election campaign since 2007, when John Howard was defeated by Kevin Rudd.
Now, new details from the RBA’s May Board meeting have prompted the Commonwealth Bank to sound the alarm over looming rate rises, predicting rate hikes of 25 basis points in June, July, August and November 2022 and February 2023, with the cash rate expected to hold at 1.60 per cent for the rest of 2023.
However, CBA noted the size of the June hike could depend on wages and labour force data, due to be released this week.
The CBA also revealed the RBA had been weighing up a 15 basis point lift, 25 basis point lift or a 40 basis point lift at the May meeting, but that ultimately, the board tossed up between a 25 or 40 basis point lift, before settling on 25 points as a “shift back to historical practices after the pandemic”.
But chillingly, CBA warns that the “mere discussion of a 40bp move means it cannot be ruled out, particularly if, once again, data surprises on the upside”.
“The RBA has shown from the decision in May that they are willing to change the play book based on the incoming data, both from official sources and the RBA’s liaison program,” CBA added.
In a recent press conference, RBA governor Lowe expressed his “hope” a cash rate of around 2.5 per cent would be both neutral and achievable.
Banks respond to rate hike
All of Australia’s banking juggernauts responded to this month’s historic rate rise within hours.
The Commonwealth Bank was first to react to the RBA’s bombshell, matching the RBA and lifting its home-loan variable interest rates by 0.25 per cent.
CBA, which is Australia’s largest bank and has a quarter of all home loans in the country, said the increase would come into effect from May 20.
ANZ followed suit shortly after CBA, announcing it would also pass the full amount on to home loan customers from May 13.
Westpac later announced it would also follow and increase home loan variable interest rates by 0.25 per cent for new and existing customers from May 17.
And the morning after the announcement, NAB became the final “big four” bank to respond, confirming its standard variable home loan as well as its reward saver bonus interest rate would increase by 0.25 per cent from May 13.
Ahead of the RBA announcement, ANZ, NAB, and Westpac had all predicted a 0.15 percent raise at the start of May, while the Commonwealth Bank had been expecting a rate rise in June, after the federal election was behind us.
All four were caught off guard by the central bank’s decision to increase the cash rate by 25 basis points, a scenario few insiders saw coming.
HTW Monthly Report - May 2022
Please see below HTW Valuers latest National property update for May 2022. For the first time in more than eighteen months, the Gold Coast has moved from a "rising market" or "approaching the peak" to now being recognised as at the Peak of the market on HTW's Property Clock. This is significant especially when you consider that much of the data that HTW rely upon is from government settlement records which are often up to three months behind. This means the peak of the market is now likely behind us.
Please See below the full HTW Valuers Property Report for the month of May