June Market Update.
Illawarra house prices enjoyed their fourth straight month of price rises after a 0.1% lift in June, bringing the median regional house price to $966,439. Units fared marginally better with a 0.4% rise bringing the median value to $681,968.
CoreLogic’s head of research Tim Lawless warned against popping the champagne bottles too early on a recovery, saying that the outlook remained uncertain with a clear pullback on the previous month’s 1.6% rise. With June inflation figures far above the Reserve Bank’s target band of 2-3%, market observers are convinced that the Bank has not yet finished his tightening phase.
Across the country, prices rose on average of 1.1%.
Low stock levels – is it really time to list?
So, what is it with property prices bucking the rising interest rate and inflation trend and moving into positive territory for the last four months? In three words: low stock levels. What we are seeing in the Illawarra is a masterclass in one of the oldest laws of economics – supply and demand. With a deep pool of buyers competing for limited stock, that is having the effect of these slight bumps in house prices. Low supply + steady demand = stable prices.
While house prices continued to climb in a modest 0.1% in June, listing levels were down 6.6% relative to the previous month and down 16.1% on the same period last year. Tim Lawless from CoreLogic says the outcome is obvious.
“Persistently low levels of advertised supply seem to be keeping a floor under housing values despite low consumer sentiment amid the high interest rate environment,” he told the Illawarra Mercury.
Bartlett and Co. Property principal Tim Bartlett says that now could be a great time to sell prior to the spring season. “Without a doubt one of the things that is keeping prices held up at the moment is the low stock listings. Buyers are very active in the market and we are seeing quality products go on and off the market in a short space of time.”
Interest rates: winners and losers
With the Reserve Bank likely to once again pull the trigger on rates in response to stubbornly high levels of inflation, it is worth remembering that interest rates are designed as a lever to keep the economy moving along at a Goldilocks pace – not too hot and not too cold. But behind interest rates is another ‘I’ – inflation. And combined, that means there are winners and losers.
Interest rates are a blunt instrument to control inflation. If the economy is running too hot, there is pressure on wages and prices and the threat of an upward spiral. If it is running too cold, confidence slips, spending falls and the threat of recession looms. With a target range of between 2-3% of inflation, the Reserve Bank pulls the lever up to slow spending, or pushes it down to speed up spending.
As with any tinkering with the economy there are winners and losers. Higher interest rates mean a better return on savings, and with higher rates filling bank coffers, bank shareholders are also a lucky bunch. Households with little debt are also winners.
But the biggest losers are households with high levels of mortgage and consumer debt. With a so-called mortgage cliff looming (ie. people coming off fixed rates back to variable), and ‘mortgage stress’ becoming a reality for many, interest rates are in the news. If the RBA seems gung-ho on interest rates, it’s because there is something much worse underneath. Inflation. Be careful what you wish for.
Spotlight on the Illawarra’s golf courses
Living in the Illawarra means living outside. With its bush walks, beaches, bike tracks and Blue mile, from sun up to sun down, the region is a vitamin D worshippers paradise. So, it comes as no surprise then that for golf lovers everyone, Wollongong is a bit of a mecca.
We spoke to local golf enthusiast and homebuyer Pat Smith about his favourite courses to knock around the Titleist.
“I love it at the Links at Shell Cove for its family friendly vibe and great condition. But for tight shots and length, look no further than Port Kembla
“Wollongong – well, location, location, location. And of course, the club house for its delicious food, great views of the beach.”
“Kiama is great for social rounds, the tightness of the angles and some challenging shots,” he said.