As of 31st May 2022 - Property Market Update - searchpartyproperty

As of 31st May 2022 – Property Market Update

In further proof of how much the property market has cooled, the national median dwelling value decreased 0.1% in May. This is the first time this median price measure has gone backward since September 2020.

This is the continuation of a recent downward trend, which is being driven by declines in the country’s biggest markets. Over the last few months, Sydney property values have seen progressively larger monthly decreases, culminating in a 1.0% drop in May. And the 0.7% decrease recorded in Melbourne means the city has now been in negative territory four of the last six months.

Source: Core Logic

In somewhat surprising news, Canberra has also seen a decline in dwelling values, which were down 0.1% for the month. This is the first time in almost 3 years, since July 2019, property prices in the nation’s capital have gone backward.

While all other capital markets saw positive price growth in May, they are also showing signs of losing momentum. Even Adelaide, where quarterly price growth actually increased over the last month, is still well down on its cyclical peak.

Source: Core Logic

Despite continuing to consistently deliver positive growth, regional markets are also starting to slow. This is most clearly seen in the significant reduction in price growth, from 1.4% in April to 0.5% in May. Much like its capital, regional South Australia is outperforming other “rest of state” markets but is still down on its cyclical peak.

Source: Core Logic

But it is not all bad news, with the rental market really beginning to pick up speed. The national median rent increased by another 1% over the last month, with units and regional areas leading the charge. This increase, combined with easing dwelling values, is helping rental yields recover from the historical lows seen mere months ago.

What lies ahead

At the moment, interest rates are unquestionably the key watchpoint for professional market analysts and casual property investors alike. While the RBA’s decision to increase the cash rate again earlier this month was not surprising, the scale of the change was. In fact, even the most experienced market watchers were somewhat caught off guard by the 0.5% increase.

But what should we make of such an unexpectedly large increase? Some see it as a clear sign of what is to come and expect rates to rise high and fast. They believe this will lead to a significant increase in mortgage distress and only exacerbate falling property prices.

Others feel that the latest increase is largely a response to the higher than first reported inflation rate. They see the scale of the change as the RBA acting quickly to reduce the inflation risk. This is supported by the RBA’s own comments, which suggest they are hoping to keep the cash rate below 2.5%.

Whichever school of thought you prescribe to, it is clear that there are further interest rate increases on the horizon. Thankfully, there are a few things that investors can do to prepare:

  • Restructure your debts: If you have not done so already, it may be worth fixing your mortgage interest rate. This will minimise the impact of future rate rises, and the set repayment amounts should make budgeting easier.
  • Get ahead on your payments: A good way to prepare for higher repayments is to start making them before you need to. This helps you adjust your budget to accommodate the additional amount, while giving you a buffer on your repayments.
  • Think longer term: While rising interest rates can present some challenges, they can also create opportunities for astute investors. As such, if you can, it should be worth hanging onto your investments and trying to ride out these increases.

Suburb Spotlight: Caloundra (QLD)

Source: @visitcaloundra

While historically known as the Sunshine Coast’s daytripper hotspot, Caloundra is increasingly being targeted for more permanent relocations. And given its beautiful beaches, many attractions, and relaxed coastal vibe, it is easy to see why.

Sitting a mere 90km north of the Brisbane CBD, Caloundra has all the makings of an ideal lifestyle location. Despite recent development, the town has managed to maintain a lot of its quiet charm and laidback, surf-focused culture. This has been complemented by the emergence of a thriving café, art, and boutique shopping scene.

Young families, in particular, are being drawn in by Caloundra’s relative affordability and slower pace of life. This has seen prices skyrocket, with the area’s median house price up over 75% (to $865,000) over the last couple of years. Units have seen a similar level of appreciation, up almost 65% (to just short of $750,000) over the same period.

There is also a strong demand for rentals in Caloundra, with the vacancy rate currently sitting well below 1%. Median rental yields are somewhat modest (3.3% for houses, 3.42% for units) at the moment, but are expected to improve. Until then, if rental returns are your priority, we suggest targeting townhouses, which are more affordable and delivering higher yields.

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.

Book your 30 minute property investment assessment here.