The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1382 MARKET REACTION AFTER RATE DROP! YOU WON'T BELIEVE IT
Are you ready for a shift in the real estate market? This episode dives into the recent interest rate cuts and their significant impact on buyer sentiment. As the lending landscape changes, we explore how these adjustments are creating a ripple effect among potential homebuyers and investors. How are market expectations evolving in this uncertain climate?
We share insights on how essential purchases are dominating the market, highlighting the patterns that are emerging among first-time buyers, particularly in entry-level sectors. Our discussion emphasises the relationship between interest rates and purchasing power, revealing how even small reductions can spark confidence for buyers previously hesitant to act.
Navigating the landscape as a tenant? We tackle the ongoing conversations happening between tenants and landlords while examining how current economic conditions may influence rental rates and maintenance dialogues.
Join us as we provide expert analysis and forecasts related to forthcoming trends in real estate. We invite your thoughts and experiences surrounding these crucial topics and encourage ongoing engagement with our community. If you're feeling inspired, we request that you subscribe to our podcast, share your insights, and leave a review!
guys. Interest rates. What's happening on the streets with real estate agents? People are asking. They're saying since the rates have gone down, mr real estate agent, what are you seeing? We're gonna let you know right now. Stay tuned. I'm the ringleader, so let's go. Interest rates, interest rates, interest rates, interest rates, interest rates, interest rates, interest rates. All we've been hearing for two years, three years, all the time.
Speaker 2:It's been the real interest rate cliff, like the cliff that people thought we were going to drop off and prices would, would you know, explode in a bad way, didn't really arrive, but we did reach the interest rate cliff where they finally made a positive adjustment after four years.
Speaker 1:Hey, talking about Cliff, what about the fixed interest people coming off fixed interest rates, Cliff? That everyone was talking about where, when everyone comes off fixed rates, their staff, their staff, their staff just sort of came and went.
Speaker 2:Yeah, it didn't really get talked about as much, but this is massive, like I guess we've seen now a weekend well, a full week and a weekend version of open homes. Yeah, I didn't get a conversation. When did that go?
Speaker 1:down Billy.
Speaker 2:Yeah, last Tuesday, tuesday before, but like we've seen a full week now of open homes and I'm not going to lie, I didn't have one conversation over the weekend about interest rates.
Speaker 1:It's really interesting. You know what I say. What do you say? Sentiment, sentiment, sentiment. I believe the sentiment was built in half a year before, like people going, coming down, coming down, coming down, coming down all the way back from like before September last year. People were talking about rates coming back. So I think that sentiment sort of embedded into people's bodies and brains. So when that rate did come down, they're like yeah well, we thought, we knew, we knew so, we thought so, we knew so.
Speaker 2:Yeah, it almost felt, I think, in some ways better for people to know that it wasn't going to go up anymore, but that was the more important part, yeah, so it was really interesting.
Speaker 2:But we do have the bottom dollar for you this morning and that's what the show's all about bringing to the viewer live good information, because it's quite interesting to see what this has actually done for people in terms of putting money back in their pocket.
Speaker 2:So you can see that, based on the loan, home loan size and the current repayment for the average being about sort of 6.3%, new repayments being 6.05%, I think there is, if you talk to your broker, I think there is lenders that will come in under 6% at the moment as well. But let's just assume you take those two averages. On a $500,000 loan, which is probably the entry level one bedrooms of the market, there's a saving of about $81 a month, $20 a week and a million bucks you know, which is a two-bedroom apartment in our market there's a saving of about $162 a month. So it's not like it's great because it helps, but it's not like this is the change that people are going to start to see into their bank accounts and it's not obviously drastic big money accounts and it's, it's not obviously drastic big money.
Speaker 1:But what I am seeing in the marketplace is essential purchases are doing well if it's, and when I say essential I mean those areas in the market where you know you just got to get the business done so. For instance, entry level one betters entry level. Two betters um entry level houses the stuff that's essential to people um Entry-level one-bedders, entry-level two-bedders, entry-level houses the stuff that's essential to people, or essential purchases, is getting done. Any prestige? No, I don't think that market's levelled off clearly. And any luxury, that luxury end of the the market. So I'd say there's prestige right at the top and there's luxury sitting underneath. That those guys have just really sort of tabled and leveled off. But that that sort of essential part of the market, that entry level part of the market, those areas they're actually they're doing well, would you say bill. They're doing better since the interest rate um reductions or they've. They're doing better since the interest rate reductions or they've just been doing better, like the last couple of months.
Speaker 2:Yeah, we definitely haven't had the time to measure it, to say how much better. But yeah, as you said, it's all about the sentiment, and the market that is most conscious about affordability is the entry-level price points. So for a 0.25% change on the cash rate, it's given them an extra 2.5% borrowing capacity. Again, it's not much, but on a million bucks it's just able to extend.
Speaker 1:It's a lot yeah, when you put on a million bucks yeah.
Speaker 2:Yeah. So that is the price point that is probably seeing the I guess the biggest change, not in prices, but probably in activity. There's been buyers waiting on the sideline to get involved and I think this small change will help to bring people to market quicker. The other thing is for homeowners. Some of the rates are being passed on pretty much immediately and others are being delayed. So again, we're not going to see the impact of this straight away. But that's a couple of the big banks in their timeframe. It's interesting stuff, but I do think now's a good time to if you've been on the sideline, get speaking with a broker, get a pre-approval in place. They're lasting for 90 days, so you don't need to go and spend the money immediately. I would be taking advantage of the you know the balanced level of stock and getting in.
Speaker 1:There you go, there you go. Yeah, is it going to be enough for people to get off their chairs and actually make a property move? The rate reduction All these people that are doing the deals were already going to do it.
Speaker 2:They're already doing the deals. A lot of a lot of buyers did come back from last year um with a sort of um reinvigorated positive attitude that they're going to get something done this year, and I think the rate adjustments only help with that um, but it's not getting people off their chairs, not yet. I do think we'll see another one, though.
Speaker 1:And, Billy, what do you reckon that taking this interest rate reduction into the next quarter and into the half year full year do you think it's going to be a similar response to what you've been seeing, or do you think there's going to be a kick or a slowdown, as everyone's spent?
Speaker 2:I reckon this entry-level price point under it's sort of 1.5, 1 to 1.5 million, and then certainly under the million mark. I think we're going to see growth in that sector this year 5% I reckon and with a second interest rate reduction I do think that'll start to get people talking and and start moving, you know, particularly if it's a 50 basis point, something like that and so investors in the marketplace.
Speaker 1:What are you seeing out there? You're seeing. You're seeing less.
Speaker 2:We have missed our investors. I do think they've gone cold for a little while. I don't know if it's just the type of property I've been showing the last sort of quarter or two, but I I genuinely do think that investors are coming back. Um, if I had to put it in like a in a one out of ten, I would say it's out of ten. I should say I. I think it's probably still only maybe a two or three, depending on the class of property we're selling.
Speaker 2:Um, it's not a huge amount, but they are there and they're often ready to go. They're not the green buyer in the negotiation. So the investors that are there are often in a position with finance or cash ready to go, making quick decisions, and they're offering some really good terms, which is matchmaking nicely with vendors that want to move on to their next opportunity quite quickly. So there's been some good buying from some of the the investors, and I think that's what they're looking for. They're looking for value. Um, they're not looking for headaches, they're just wanting something that's quite clean, straightforward and easy to transact on um, um, um um.
Speaker 2:Rents residential rents since the rate reduction I'd say not changed. We haven't seen that change yet. But I was talking to you know someone yesterday and they were sort of just saying that their rent's recently gone up in a rent negotiation. As a tenant, what can I do about it? And it's a tricky balance. The reality is there isn't much you can do from a tenant side. But she was saying the frustration that she was feeling was that with the rent going up, um, none of the, none of the sort of the maintenance side of things that had changed. Um, so as a tenant I know we've gone up a little bit off topic here but as a tenant, if, if the rents are going up this year, you know, talk to your landlord if there's bits around the house or the apartment need to be done not a bad time to talk about it. It's a bit of given, you know, a bit of sort of. It's a bit of giving and and going, like on both hands.
Speaker 1:Um, my question is since the rates have gone down, have you seen the attitude of of the the tenant or the attitude of the landlord change and then that that effect across to rent? So have you seen a landlord become a little bit is it too early to call, maybe, but have you seen a landlord become a little bit more confident to say, okay, I'm definitely going to put the rent up now, I'm saving a little bit of money if it becomes vacant? Are you seeing like that consumer confidence of it messed up?
Speaker 2:No, I think it's too early to change, but you know it's inevitable at some point this year that that's probably going to be a conversation for a lot of people. My point is, you know, communicate at the end of the day.
Speaker 1:There you go, guys and girls. That is the net effect of the rates that have gone down over the last two weeks. And what a wild couple of weeks, um, we've had with the low to medium housing changes. So you can do dual locks everywhere. You can start doing terraces, unit blocks in a lot of places 800 meters, 400 meters to shops in sydney, new south wales. Um, and rates, it's been a. It's been a big, it's been a big week, big couple of weeks.
Speaker 2:Massive. When do?
Speaker 1:you reckon we're going to see the next big announcement on rates Mid-year I think it's going to be a July-August move. I think there was a lot of momentum in this small figure, in this small increment. I think there was a lot of momentum in this small figure, in this small increment. I think there was a lot of momentum. It was a swing from the positive, the upwards direction of interest rates to a downwards direction. It's like a locomotive train changing its direction. So I think they're going to want to see what that locomotive train does before they make a decision, because it's such a big, hunky piece of machinery, that interest rate. So it probably I think it'll be the wise people making the decision will probably wait until mid-year, given three to five months. What do you think?
Speaker 2:I reckon keep a close eye on the election. I reckon it might sort of get dovetailed into that yeah, have a great day everyone have a beautiful. Monday see you, billy Bob, take care, thanks, guys.