Interest rate announcement – August 2018

Today the Reserve Bank of Australia met to review the official cash rate. After last cutting rates in August 2016, the RBA have again decided to keep the cash rate on hold at 1.50% this month. Inflation remains low at 1.9% pa.

Tight credit conditions and lower overall investment activity have started to cause dwelling prices in Australia to trend down with the CoreLogic July Home Value Index showing that dwellings in both capital cities and regional areas have declined over the last 3 months.

National dwelling values were down 0.6% during the month of July and 1.6% lower over the 12 month period to 31 July 2018. This is the largest annual fall since August 2012. However, despite the flattening of the market over the last 12 months, dwelling values are still 31% higher than they were five years ago.

Of the five major capital cities, dwelling prices in Sydney have cooled the most over the last 12 months, down 5.4% since August last year. This was followed by Perth (down 2.3%) and Melbourne (down 0.5%). Brisbane (up 1.2%) and Adelaide (up 0.7%) were the only two major capital cities to record positive growth over the last 12 months.

Elsewhere, Hobart (up 11.5%) and Canberra (up 2.4%) had positive capital growth, while Darwin (down 6.2%) continued to struggle.

Interestingly, it is the premium end of the property market that has contributed most to the declines. In Melbourne for example, according to CoreLogic data, the value of dwellings in the top quartile of properties declined by 4.1% over the last 12 months but the value of dwellings in the lowest quartile actually increased by 7.5%. Similarly in Sydney, premium properties declined by 8.0% while the least expensive quarter of the market declined at a much lower rate of 1.8%.

Table 1: CoreLogic Home Value Index – July 2018

CategoryChange in dwelling valuesMedian Value
MonthAnnual
Sydney-0.6%-5.4%$863,769
Melbourne-0.9%-0.5%$709,568
Brisbane0.1%1.2%$494,634
Adelaide-0.1%0.7%$438,163
Perth-0.8%-2.3%$457,274
Hobart0%11.5%$435,833
Darwin0.4%-6.2%$439,596
Canberra0.2%2.4%$590,229
Combined Capitals-0.6%-2.4%$650,165
Combined Regional-0.4%1.6%$367,067
National-0.6%-1.6%$554,263

The key factors currently impacting the property market include:

  • Lower investment activity – higher interest rates on investment loans and limits on interest only lending are impacting the number of investors looking to purchase.
  • Housing supply – construction rates remain above average in most states while demand, particularly from investors and foreign buyers is decreasing.
  • Migration trends – There is an increasing number of residents moving from New South Wales and Victoria to other states. Queensland has been the major beneficiary of these movements which was one factor that helped dwelling prices in Brisbane rise by 1.2% over the last year.

Our Current Best Interest Rates

The best home loan rates we currently have available:

  • Variable rate of 3.59% pa (comparison rate: 4.42% pa)
  • 1 year fixed rate of 3.58% pa (comparison rate: 4.62% pa)
  • 2 year fixed rate of 3.65% pa (comparison rate: 4.26% pa)
  • 3 year fixed rate of 3.79% pa (comparison rate: 4.58% pa)
  • 5 year fixed rate of 3.98% pa (comparison rate: 4.43% pa)

Assumptions: <$400,000 loan, owner-occupied purchase, principle & interest, LVR < 80%.