The downward trend in property prices is continuing, with the national median dwelling value dropping 0.6% in June. Importantly, this decrease has also pushed quarterly growth figures into negative territory, with national dwelling values down 0.2% since March.
As in previous months, this is mostly being driven by declines in Sydney and Melbourne. Both markets slowed further over June, with median prices down 1.6% and 1.1% (respectively) for the month.
But Sydney and Melbourne are not alone, with monthly growth rates shrinking in all capital city markets. Hobart is the clearest example of this, returning to negative territory after a brief spike in activity in May. Even Brisbane, which has been one of the strongest performing markets over the last 12 months, has seen prices plateau.
Adelaide has once again been the standout, as the only capital to record a monthly growth rate greater than 1%. It has also overtaken Brisbane as the best performing capital over the last 12 months, with prices increasing 25.7% since June 2021.
Looking outside the capitals, the story is much the same, with the monthly combined regional growth rate dropping to 0.1%. This is largely due to regional Victoria falling into negative territory (down 0.1%) and prices in regional NSW stagnating.
That said, most of the remaining “rest of state” markets recorded modest growth of 0.1% – 0.2% for the month. The only exception was regional South Australia, where the median dwelling value increased by a relatively impressive 1.8%.
In good news for investors, the rental market continues its upward trend, with national rents up 0.9% over the last month. This has lifted the annual rental growth rate to 9.5%, which is the highest since December 2008. Most market watchers believe this is a response to ongoing supply issues, with the national vacancy rate falling to 1.2%.
Interest rate update
Earlier this month, the Reserve Bank of Australia (RBA) announced another 0.5% increase to the cash rate. This is the first time in its history that it has delivered back-to-back interest rate rises of this size. And it has warned that further, possibly even larger, increases will be required to get inflation back under control.
Over the last month, we have also seen several major banks significantly increase their interest rates for fixed rate mortgages. The Commonwealth Bank started this by announcing the largest increase on record, lifting their fixed mortgage rates by 1.4%. NAB quickly followed this lead, raising the interest rate on several of their fixed rate loans by 1.1%.
But while these increases may seem steep and sudden, this rate of growth is unlikely to be sustained. The RBA has said that the significant increases we are currently seeing are designed to help “normalise monetary conditions” quickly. And, with property prices beginning to decline and household spending starting to slow, the signs suggest this is working.
Over the coming month, the biggest watch point will be the June quarter inflation data report, released on 27 July. If this shows that the economy is starting to cool, we might see interest rate increases start to slow. But, if the numbers are even worse than the forecasts, you should prepare yourself for further significant rate hikes.
Suburb Spotlight: Kangaroo Flat (VIC)
Like most parts of the Bendigo region, Kangaroo Flat is rich in goldmining history. But while it has shared in the fortunes of its neighbours, this area stands firmly on its own. With an array of local amenities and a clear sense of community, it is more satellite city than standard suburb.
Kangaroo Flat is located 5km southwest of the Bendigo CBD and 140km northwest of the Melbourne CBD. Sitting on the “Melbourne side” of Bendigo, it offers an easy commute into the capital, while still feeling quite regional. This makes the area a good option for those looking to swap suburban life for a quieter bushland setting.
With a median house price sitting just below $500,000, Kangaroo Flat is one of the more affordable areas within Greater Bendigo. This has made the suburb particularly popular with young families and first home buyers looking to get more for their money.
For investors, units in Kangaroo Flat currently hold the most appeal. Despite increasing by over 50% over the last 2 years, the median unit price is still only just over $300,000. Strong demand for rentals in the area has also seen rent rates increase and pushed the median yield above 5%.
At Search Party Property, we specialise in developing tailored investment strategies and will work with you to come up with a suitable plan of attack. We also regularly assess your strategy ensuring that it is fit for purpose and delivering the desired results.