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Real estate, RBA rates: Buyers avoid unrenovated homes as house prices fall

The Australian property marketing is already “setting”, with rising interest rates scaring borrowers away and forcing sellers to accept lower prices.

But not all homes are made equal, and buyers are becoming more picky — with newly renovated, turnkey properties now in demand, auctioneers say.

Stefan Stella from Ray White Glenroy, whose sale of a $1.5 million East Brunswick terrace to a young couple who “weren’t really looking” went viral over the weekend, told news.com.au there was “a bit of turmoil” in the market but that “anything that’s priced correctly does sell”.

“I had another auction on Saturday that was a complete dead duck, no action whatsoever,” he said.

That property, a 700 square meter corner block development site, would have normally sold for $1.3 million to $1.4 million, but passed in at $1.1 million.

Given the troubles in the building industry, Mr Stella said properties that are already renovated are more desirable.

“Basically anything that is going to require work, people are now taking into consideration the additional time and costs,” he said.

“Barkly Street was an exception, it’s the best street in East Brunswick.”

When prices began to fall earlier this year, Mr Stella said many sellers baulked at taking a haircut on a “superior property” to one down the street that might have sold for a higher price just a few months earlier.

“With all the negativity in the media the past three or four months, I’d say now most people are accustomed to the market that is, whereas at the start they were utilizing comparable sales from three months earlier when the market was no longer comparable. ,” he said.

“That’s where it was hard. Everything is still selling provided it’s priced right.”

Mr Stella said apartments had been worst affected by the downturn, followed by unrenovated properties.

“And then the townhouse market, I think because of its pricepoint, you generally find it holds its own a little bit more,” he said.

Meanwhile, Sydney-based auctioneer Tom Panos said in a video update on Saturday that seven out of his 10 auctions that day sold.

“That’s a pretty good result – 70 per cent today, which is saying to me two things,” he said.

“Number one that there is settling and normality coming into the market.”

Mr Panos said the media was the “best vendor manager in real estate at the moment”.

“Every time I walk into a property the first thing I ask is, ‘Mr and Mrs Vendor, what’s your understanding of the current market?’ Nine out 10 vendors say to me, ‘We know it’s hard, and we know it’s getting harder.’ And for that reason you are getting vendors that are either giving you reserves that are realistic, or they’re giving you optimistic reserves with a fallback number which is normally good enough to sell a property,” he said.

After a few weeks of “OK results” – Mr Panos in July said he was “really stressed” after almost no buyers showed up to his auctions – the real estate coach said there was a “settling in the market and people are accepting these are the new values”.

“The real question is going to be, what’s going to happen in September, October, November as the market appraisals start lining up now as we end the winter, and we move into our spring selling season which sees an upswing in listings?” he said.

“One would assume that more listings should see a softening of prices. But the softening’s already happened. I’ve said it before, there’s a data lag that economists are missing by about three, four months. The market has already been repositioned in most areas by 10 per cent, even 15 per cent, some markets even 20 per cent. But realistically, we’re probably going to see another softening of around five, 10 per cent. We’re close to the bottom I think.”

He pointed out that “every time there’s a rate rise that equates to 1 per cent, it basically means borrowers get 10 per cent less from their bank”.

“So if you get a 2 per cent increase in interest rates, you’re roughly looking at approximately a 20 per cent drop in borrowing availability for a buyer from a bank,” he said.

“This is an important number because what’s it’s basically telling us is that if rates keep going up at the speed that they’re going up at the moment, that buyers are going to have less money.”

Mr Panos speculated that this is why there were “a few buyers that are rushing in and snapping up property”.

“They’ve sat down with their mortgage broker and their broker has basically said to them, ‘Listen, there’s two sides to this. Yes there might be a further dropping of prices, but since they’ve already dropped, and you’ve got this loan approved right now, use it, secure a home that you like, and even if you haven’t bought at the bottom , you are keeping it for the next five, 10 years. But if you don’t buy it right now, guess what happens? You might not have the same amount of money out in the marketplace because you’re going to be rerated by the banks.’”

It comes after the Reserve Bank hiked interest rates for the fourth month in a row last week.

The 50 basis-point increase at the central bank’s August meeting brings the official cash rate to 1.85 per cent, up from the record low 0.1 per cent it was up until May.

Already, the rise in interest rates has pushed house prices down in most major cities as borrowers stare down the barrel of higher monthly payments.

PropTrack’s Home Price Index shows a national decline of 1.66 per cent in prices since March, but some regions have seen much sharper falls.

“As repayments become more expensive with rising interest rates, housing affordability will decline, prices pushing further down,” PropTrack senior economist Eleanor Creagh said.

There were 1080 auctions across the country on Saturday with 51.3 per cent sold, according to preliminary clearance rate data from PropTrack.

Melbourne saw 364 auctions with a clearance rate of 59.1 per cent, while Sydney had 354 auctions with a clearance rate of 48.9 per cent.

“It was a quiet week for auctions across the country,” Ms Creagh said.

“Although, clearance rates ticked up in Brisbane, Melbourne, Sydney, Adelaide and Perth despite the third consecutive outsized rate rise delivered last week which brought the cash rate to the highest it’s been in six years. We are perhaps reaching a point where vendor price expectations have lowered after several months of price falls in some parts of the country, so more properties are clearing at auction.”

Ms Creagh added that buyers were also aware that borrowing power would be “further constrained with rates continuing to rise and so some are taking advantage of the increased choice available now”.

“New listings have remained strong and although prices are falling, there is lots of choice for buyers,” she said.

“That said, sales volumes are slowing as housing market conditions have moderated with rising rates.”

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Melbourne real estate: Couple mocked for impulse buying $1.5m terrace

A young Melbourne couple have been roasted online after “impulse buying” a $1.5 million East Brunswick terrace at auction.

But the agent who sold the property has now spoken out, saying the backlash from “keyboard warriors” is unfair and that the sale has been misrepresented.

Property website Domain published an article on Saturday about the young buyers of 110 Barkly Street, which sold under the hammer after the couple pipped another bidder for just $500.

Darcy and Tessa, who declined to give their last names, ultimately paid $1,500,500 for the deceased estate, which went to auction with a price guide of $1.3 million to $1.43 million.

“To be honest we weren’t really looking, we were just looking casually and this one popped up,” Tessa told Domain.

Darcy added, “There’s a bit of concern around with what housing prices are doing but this one really stood out to us, and it turned out we got it.”

The couple said they planned to fix up the terrace and rent it out in the short term before moving in later and doing further renovation.

Darcy said while interest rate rises were “certainly something to consider”, the couple were “in a good position with renting it out at this point”.

“From our point of view we can pass that on to the rental market,” he said.

The article went viral on Reddit after a user on the Melbourne forum posted a screenshot of the headline.

“I guess I don’t feel so bad about impulse buying a Snickers at the Coles checkout now,” they wrote.

“I mean we’ve all been there, right? Just wandering down the street to get coffee or something, you’ve got $1.5 million burning a hole in your pocket and you stumble across an auction – damn it! Did I really just buy a house again? Man my wife is going to give me a hard time about this when I get back.”

One person replied, “I genuinely know two people who have done this. One whilst driving past on the way to visit a friend (investment property in Footscray), and the other whose husband came home and announced he’d bought a new family home. WTF.”

Another wrote, “Joke’s on them, be at least $500,000 less in about six months.”

Ray White Glenroy auctioneer Stefan Stella told news.com.au on Monday he felt the reaction from “keyboard warriors” online had been “pretty harsh”.

“As much as it said they weren’t really looking, they did see it on the first open, came multiple times – they were there three times,” he said.

“In my opinion they were probably always going to get it. The underbidder only saw it in the last week. I think what they may have meant was they weren’t actively looking and religiously out there every Saturday, that’s potentially the message they were trying to get across.”

It comes after the Reserve Bank hiked interest rates for the fourth month in a row last week.

The 50 basis-point increase at the central bank’s August meeting brings the official cash rate to 1.85 per cent, up from the record low 0.1 per cent it was up until May.

Already, the rise in interest rates has pushed house prices down in most major cities as borrowers stare down the barrel of higher monthly payments.

PropTrack’s Home Price Index shows a national decline of 1.66 per cent in prices since March, but some regions have seen much sharper falls.

“As repayments become more expensive with rising interest rates, housing affordability will decline, prices pushing further down,” PropTrack senior economist Eleanor Creagh said.

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Australian house prices: 300 suburbs that have significantly dropped in value

As skyrocketing interest rates smash the Australian housing market, a dozen suburbs have already seen property prices fall by more than $500,000 since March.

PropTrack’s automated valuation model (AVM) data show more than 300 suburbs across the country where dwelling values ​​have experienced six-figure falls over the quarter.

In percentage terms, the worst-performing suburb in the country was South Hedland in WA’s Pilbara region, where units dropped by 24.81 per cent to a median value of $213,791 in June 2022 – a loss of more than $70,000.

That was closely followed by Booval in Queensland, where unit prices were down 24.64 per cent, or more than $121,000, to $370,231.

But it was wealthy suburbs in the capital cities that experienced the largest falls in dollar terms, with parts of Sydney’s northern beaches and eastern suburbs, Melbourne’s Mornington Peninsula, as well as inner-city Perth and Canberra all experiencing falls in excess of half a million dollars.

Former Prime Minister Malcolm Turnbull’s eastern suburbs home of Point Piper recorded the biggest fall in dollar terms, with units there losing nearly $715,000 in value – a 14.82 per cent fall from $4.82 million to $4.11 million.

Manly came in second place with losses of nearly $680,000 in house prices, representing a 13.8 per cent fall from $4.92 million to $4.25 million.

Ingleside on Sydney’s northern beaches saw house prices fall nearly $610,000 to $2.77 million, while Flinders in Melbourne suffered a $600,000 fall to $2.51 million.

Other suburbs where house prices fell by more than $500,000 include Clontarf, Dover Heights, North Bondi, Bronte, Rose Bay and Bondi Beach in Sydney, Peppermint Grove in Perth and Griffith in Canberra.

Close behind in the $400,000 range were the likes of Double Bay and Tamarama in Sydney, Red Hill – both in Victoria and Canberra – and Mulgoa at the foot of the Blue Mountains.

“Price falls are largely being led by the ‘high end’ of the market and higher value suburbs,” said PropTrack senior economist Eleanor Creagh.

“Manly and Tamarama in Sydney have all posted declines in quarterly values.

“Previously popular suburbs in the Central Coast and Melbourne’s Mornington Peninsula have also seen values ​​decline.

“It’s often the case that the upper end of the market experiences larger price declines, and at the moment it’s the suburbs that are home to more expensive properties that are seeing bigger price falls than more affordable properties.”

It’s not all bad news for homeowners, however.

House prices in some suburbs are still rising, led by Balmain East in Sydney’s inner west, which saw house prices rise more than $329,000 over the quarter to $3.48 million.

New Farm in Brisbane was second with house price growth of more than $295,000 to $2.65 million, followed by Coledale in NSW’s Illawarra region, which was up nearly $289,000 to $2.47 million.

Other suburbs where dwelling values ​​rose more than $200,000 were Newcastle East, The Rocks and Waterloo in Sydney, and Brisbane’s Bowen Hills, Tenerife, Highgate Hill and West End.

“While the current cycle of exceptional price growth is winding down Australia-wide, there are some parts of the country bucking the falling price trend,” said Ms Creagh.

“Parts of Brisbane, Adelaide and regional Australia are proving more resilient.

“With the pandemic driving a boom in remote working, housing markets in parts of regional Australia have emerged, with sea and tree changers looking for lifestyle locations, larger homes, and beachside living.”

The ongoing low supply of properties available for sale, combined with relative affordability advantages driving heightened demand, are causing prices to continue to rise in some regional areas or only just beginning to fail as the impact of higher interest rates weighs on the market.

“As the home price cycle has matured and interest rates are now rising, some suburbs in previous regional hot spots on the Sunshine Coast, and in the Southern Highlands and Geelong regions are starting to see larger price falls, with affordability advantages having been eroded since the pandemic onset,” Ms Creagh said.

“Suburbs like Lorne, Sunshine Beach, Minyama and Noosa Heads have all seen quarterly declines in unit or house values.”

She added it was a similar picture in the capital cities, with markets that led the upswing like the “lifestyle and coastal locations of the northern beaches and eastern suburbs now seeing larger price falls”.

It comes after the Reserve Bank hiked interest rates for the fourth month in a row on Tuesday.

The 50 basis-point increase at the central bank’s August meeting brings the official cash rate to 1.85 per cent, up from the record low 0.1 per cent it was up until May.

Governor Philip Lowe said the RBA had made the decision to raise the rates in a bid to drive down the current 6.1 per cent inflation figure.

In a statement, he said the path to returning to inflation under 3 per cent while keeping the economy on an even keel was something that would take time.

“The path to achieve this is a narrow one and clouded in uncertainty, not least because of global developments,” Dr Lowe said.

“The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia’s invasion of Ukraine, and the Covid containment measures in China. Today’s increase … is a further step in the normalization of monetary conditions in Australia.”

Already, the rise in interest rates has pushed house prices down in most major cities as borrowers stare down the barrel of higher monthly payments.

PropTrack’s Home Price Index shows a national decline of 1.66 per cent in prices since March, but some regions have seen much sharper falls.

“As repayments become more expensive with rising interest rates, housing affordability will decline, prices pushing further down,” Ms Creagh said earlier this week.

Last week, the Australia Institute’s chief economist, Richard Dennis, told NCA NewsWire the RBA was one of the biggest threats to the economy at the moment.

“If we keep increasing interest rates because inflation is higher than we’d like, we might cause a recession,” he said.

“Increasing interest rates won’t help us prepare for a slowing global economy … but they might actually further dampen the Australian economy.”

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– with NCA NewsWire

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