Latest / 360 with Katie Woolf / CoreLogic's Research Director Tim Lawless explains how the interest rate hike will affect home owners

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CoreLogic's Research Director Tim Lawless explains how the interest rate hike will affect home owners · 360 with Katie Woolf

• 0:00
  Speaker 1: But we do know that. Obviously, the big news yesterday
• 0:03
  Speaker 1: was the fact that the Reserve Bank had increased interest
• 0:05
  Speaker 1: rates for the fourth month in a row, raising its
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  Speaker 1: cash rate target by half a percentage point. So the
• 0:12
  Speaker 1: rise in this cash rate since early May does mean
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  Speaker 1: that it's going to add about four hundred and seventy
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  Speaker 1: two dollars a month to repayments on a five hundred
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  Speaker 1: thousand dollar loan. Now, we know that it is having
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  Speaker 1: an impact on a lot of people with mortgages in
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  Speaker 1: the Northern Territory, but we also know that those house prices.
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  Speaker 1: If you're in the market to purchase one and those
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  Speaker 1: house prices have gone down a little bit, it's probably
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  Speaker 1: music to your ears, Whereas if you are somebody who's
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  Speaker 1: hanging on to a mortgage and trying to maintain that property,
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  Speaker 1: it could be quite a difficult time for you. But
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  Speaker 1: joining us on the line right now to tell us
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  Speaker 1: a little bit more about how the market is looking
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  Speaker 1: from core logic, it is Tim Lawless. Good morning to you.
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  Speaker 2: Tim Katie, good morning.
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  Speaker 1: Lovely to have you on the show.
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  Speaker 2: Tim.
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  Speaker 1: In the last quarter, How did Darwin perform regarding those
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  Speaker 1: house prices, Well.
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  Speaker 2: Darla was actually one of the better markets in terms
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  Speaker 2: of resilience to falls. We saw Darwin housing values rise
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  Speaker 2: almost two percent over the quarter, and just over the
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  Speaker 2: month of July alone they're up about half or percent.
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  Speaker 2: So in dollar terms, that means we saw Darwin housing
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  Speaker 2: values rise by about two six hundred dollars in a month,
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  Speaker 2: nearly nine five hundred dollars over the quarter. So yeah,
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  Speaker 2: bucking the trends that we're seeing in Sydney's calling really
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  Speaker 2: rapidly so as Melbourne most of the other capitals are
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  Speaker 2: starting the trend lower now, not quite the case for Darwin.
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  Speaker 1: Yeah, right, it'll be an interesting one for us to
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  Speaker 1: keep an eye on. And I guess with those house
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  Speaker 1: prices still going up for that last quarter, good news
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  Speaker 1: if you're somebody who's who has a house and you're
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  Speaker 1: hanging on to that mortgage. Maybe not such good news
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  Speaker 1: if you're trying to enter the market.
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  Speaker 2: Well, that's exactly right. There's always different perspectives. So if
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  Speaker 2: you if you do on home in Darwin and then
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  Speaker 2: you probably do want values to rise, especially considering if
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  Speaker 2: you've held a home for a Darwin for a long time,
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  Speaker 2: chances are you're still seeing the value are property lower
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  Speaker 2: than what it was. So even even look at the
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  Speaker 2: peak in the marketplace was way back in twenty fourteen,
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  Speaker 2: and we haven't quite seen Darwin prices recover to those
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  Speaker 2: levels just yet. There's still down about eleven percent from
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  Speaker 2: where they were when the market was crazy back in
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  Speaker 2: that sort of the nearly part of the two thousands.
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  Speaker 2: So chances are, you know, people who own a property
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  Speaker 2: in Darwen are probably going to be looking for more
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  Speaker 2: price growth, But affordability is actually pretty straightforward. Compared to
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  Speaker 2: markets like Sydney or Melbourne. There's like a Darwin's Medium
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  Speaker 2: prize of a dwelling into about five hundred and six
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  Speaker 2: thousand dollars. You're buying in Sydney it's about one point
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  Speaker 2: one million, Melbourne's at seven hundred and ninety thousand, so
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  Speaker 2: pretty cheap when you're looking at the northern territory.
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  Speaker 1: Yeah, and I guess it always depends what area of
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  Speaker 1: the territory you're looking at that and we've spoken a
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  Speaker 1: little bit there about Darwin does score logic sort of
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  Speaker 1: look more, you know, more regionally, I guess as well,
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  Speaker 1: or a little bit further out at the likes of
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  Speaker 1: Palmerston and the rural area and any of those other locations.
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  Speaker 2: Yeah. Absolutely, We look at property prices everywhere, property markets everywhere,
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  Speaker 2: and we can see there is a bit of diversity.
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  Speaker 2: You know, if you've got a parmesan, for example, then
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  Speaker 2: the market's been just a little bit softer. If you
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  Speaker 2: come back into some of the inner city markets, they've
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  Speaker 2: been a bit stronger. And maybe surprisingly, we've actually seen
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  Speaker 2: the unit market a little bit stronger over the last
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  Speaker 2: six months as well, which is quite the turnaround because
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  Speaker 2: we have been seeing unit prices in Darwin have been
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  Speaker 2: very weak for a long period of time. In fact,
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  Speaker 2: there's still about twenty six percent below their peak. If
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  Speaker 2: you are in a unit in Darwin, the value its
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  Speaker 2: currently tracking where it was all the way back in
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  Speaker 2: about two thousand and eight.
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  Speaker 1: Yeah, right, And I guess at the moment as well,
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  Speaker 1: you know, when it comes to rentals, there is a
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  Speaker 1: bit of constraint I guess you'd say on the rental
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  Speaker 1: market in the sense that you know, if you're trying
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  Speaker 1: to find a property to move into, there's not a
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  Speaker 1: huge amount available.
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  Speaker 2: No, rental markets are extraordinarily tight everywhere around the country,
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  Speaker 2: including Darwin. The vacancy rate across Darwin's only one point
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  Speaker 2: one percent. Wow, it's about one point two percent for
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  Speaker 2: houses one percent for units. On average, over the past
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  Speaker 2: decade or so, you typically expect the Darwin vacancy rate
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  Speaker 2: to be around about the four percent mark. So it
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  Speaker 2: just highlights how tight the rental market is and demand
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  Speaker 2: for rentals is still quite strong, but there's not a
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  Speaker 2: lot of supply there, which means rental prices are rising
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  Speaker 2: quite quickly and tim is.
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  Speaker 1: It a similar situation in other capital cities or other
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  Speaker 1: parts of Australia as well when it comes to the
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  Speaker 1: rental market.
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  Speaker 2: Absolutely, we're seeing a rental crisis pretty much everywhere. Vacancy
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  Speaker 2: rates tend to be around that one percent market, if
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  Speaker 2: not even lower than that across most of the capitals,
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  Speaker 2: and then getting into regional market vacancies tend to be
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  Speaker 2: even lower. So it doesn't look like we're in a
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  Speaker 2: situation where renters have really Rental demand has really been
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  Speaker 2: amplified through the pandemic. A lot of rental households becoming smaller,
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  Speaker 2: so group households splitting up to become loan persons or couples.
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  Speaker 2: People generally have been avoiding high identity rentals as well,
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  Speaker 2: at least during the height of the pandemic, wanting to
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  Speaker 2: move away from a shared amenity environment. That's all starting
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  Speaker 2: to change now, though, I think simply because rental affordability
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  Speaker 2: is now forcing people to really maximize their occupancies and
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  Speaker 2: potentially towards the media, the high density sector, because it
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  Speaker 2: is quite a bit more affordable to rent.
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  Speaker 1: Oh absolutely, and it's tough going for so many people
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  Speaker 1: out there as well. If you're not able to find
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  Speaker 1: a rental property or the cost of that rental property
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  Speaker 1: has gone up. It's certainly making it pretty difficult for
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  Speaker 1: a lot of people, especially.
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  Speaker 2: When you compare the fact what all rents across dow
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  Speaker 2: and there are about twenty eight percent through the COVID
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  Speaker 2: phase so far since about March twenty twenty three to now,
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  Speaker 2: we've seen rents ride only thirty percent. Huge incomes haven't
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  Speaker 2: moved anywhere near that much. And then to add further pain,
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  Speaker 2: we've got this really rapid rate of inflation. It's being
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  Speaker 2: driven by things we can't really pull back our expenditure on,
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  Speaker 2: like fuel and energy costs and construction costs. So for
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  Speaker 2: a lot of households, they're really in this pinture movement
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  Speaker 2: if you will, of a lot higher costs for things
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  Speaker 2: you need to buy, as well as higher accommodation costs well.
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  Speaker 1: And then of course yesterday we learned that the Reserve
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  Speaker 1: Bank raised the official interest rate by another half a
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  Speaker 1: percent yesterday. What impact does this have on those firstly
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  Speaker 1: that have mortgages in the territory.
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  Speaker 2: Well, clearly this is a bad thing for anybody who
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  Speaker 2: has debt because they're paying more for having that debt.
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  Speaker 2: So if you think about the typical house price in Darwin,
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  Speaker 2: it's about five hundred and six thousand dollars a typical
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  Speaker 2: dwelling price. Most people would have a twenty percent deposit
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  Speaker 2: if they're buying into the market. So before interest rates
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  Speaker 2: started to rise, your typical repayment on a mortgage based
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  Speaker 2: on that medium price would be about fifteen hundred and
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  Speaker 2: eighty bucks a month based on interest rates rising to
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  Speaker 2: the cash rate at one point at five. Now that
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  Speaker 2: means variable mortgage rates are probably around about four point
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  Speaker 2: two percent now, so that's gone. The month of your
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  Speaker 2: payments are gone from about sixteen hundred up to about
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  Speaker 2: nineteen hundred and nearly two thousand dollars a month. So
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  Speaker 2: an increase of about three hundred and ninety dollars, and
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  Speaker 2: chances are ready going to go up a lot further
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  Speaker 2: from here. So I think for anybody who does have
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  Speaker 2: a mortgage, they can expect they'll be paying more that
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  Speaker 2: for that debt.
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  Speaker 1: Yeah, and that's a tough thing. As you've just pointed
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  Speaker 1: out as well, the cost of living is going up
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  Speaker 1: in so many different areas. Petrol here in the territory
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  Speaker 1: we're playing an astronomical amount. And then when you look
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  Speaker 1: at at things like your fruit and vege and when
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  Speaker 1: you go to do your grocery shopping, transport costs for
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  Speaker 1: a lot of different you know, a lot of different
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  Speaker 1: businesses are on the rise. There is no doubt that
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  Speaker 1: that cost of living is having a big impact I
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  Speaker 1: would think, not only on those that own their homes,
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  Speaker 1: but those that are renting or looking to rent.
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  Speaker 2: Yeah. Absolutely so ultimately you'd have to think that household
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  Speaker 2: balance sheets are going to need more thinly stretched, which
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  Speaker 2: means people stop spending on things they don't need to
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  Speaker 2: spend on, so less dining out, less holidays, less fancy shoes,
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  Speaker 2: that type of thing, and probably also it means for
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  Speaker 2: the housing sector, less housing demand. For people looking to
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  Speaker 2: get a mortgage, Lenders becoming a lot more cautious as well,
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  Speaker 2: particularly if they're lending to borrowers with high debt levels
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  Speaker 2: relative to their incomes. And of course for renters, higher
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  Speaker 2: interest rates don't all that more all that meaningful, but
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  Speaker 2: you probably will find with the vagancy rate as low
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  Speaker 2: as what it is, landlords are trying to pass an
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  Speaker 2: additional cost onunder rent as well.
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  Speaker 1: Yeah, what kind of long term impact do you think
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  Speaker 1: it's going to have, tim, I guess us the board
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  Speaker 1: when you look at when you look at the housing market.
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  Speaker 2: There's a whole bunch of things that flow out of this. Obviously,
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  Speaker 2: housing affordability in Darwin isn't as challenging as what it
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  Speaker 2: is in other parts of the country, but we probably
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  Speaker 2: will find that rental affordability starts to become a lot
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  Speaker 2: more in focus. And also for those people that are
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  Speaker 2: able to get their foot in the door of the
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  Speaker 2: housing market. We're probably moving from a situation where there's
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  Speaker 2: been a lot of focus on you know, being able
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  Speaker 2: to save for a deposit and get your foot in
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  Speaker 2: the door, to now focusing on well, once you do
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  Speaker 2: own a home, what does it mean for your mortgage
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  Speaker 2: or payments, can I actually afford them? And doesn't mean
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  Speaker 2: I need to cut back on my lifestyle as well.
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  Speaker 2: There's also a bunch of other things around. You know,
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  Speaker 2: if you can't afford to put a roof over your head,
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  Speaker 2: then you're going to need to rely on some sort
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  Speaker 2: of social or community housing. I think it's fair to
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  Speaker 2: say we need to see a lot more funding coming
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  Speaker 2: out of the federal and the territory government to make
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  Speaker 2: sure that there are more affordable housing options available.
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  Speaker 1: Yeah, you're spot on. It's something that we've spoken about
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  Speaker 1: on this show before. We've certainly you know, we've spoken
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  Speaker 1: to NT Shelter and others about that very issue and
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  Speaker 1: how tough it is as well when you're trying to
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  Speaker 1: grow the workforce, if there's nowhere that they can that
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  Speaker 1: they can live at an affordable cost, that's exactly right.
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  Speaker 2: Everybody needs a roof over their head, regardless of their
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  Speaker 2: of their situation and the financial situation. So more funding
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  Speaker 2: I think would be spent very quickly and very effectively.
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  Speaker 1: Perfect well tim lawless from our core logic. We really
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  Speaker 1: appreciate your time this morning and giving us that insight
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  Speaker 1: into the market. Thank you. So much.
• 10:35
  Speaker 2: Thanks Katie, Lovely to shat, thank you,