- Cash rate is likely to remain on hold as the Reserve Bank hosts its monthly meeting tomorrow
- With the median house price hitting $1.4M, REINSW CEO argues cheap finance is irrelevant
- Demand remains high despite the extended lockdown
With the cash rate likely to remain at a historic low tomorrow during the Reserve Bank’s monthly meeting, the low rates don’t represent a win for everyone, argued Real Estate Insitute of New South Wales (REINSW) CEO, Tim McKibbin.
“The Reserve Bank will almost certainly leave interest rates unchanged again tomorrow to continue the low cost of borrowing environment buyers have been taking advantage of throughout the current boom,” explained Mr McKibbin.
However, while rates remain low and all borrowers including first home buyers can access cheap finance, Mr McKibbin noted that the more prices go up, the greater the deposit required.
“The Sydney median house price has topped $1.4 million, according to Domain, and for many first home buyers, the interest rate they could potentially access is irrelevant without the large deposit they need.
“Add to this the removal of the temporary stamp duty concessions for first home buyers at the end of July, and the capacity for first home buyers to compete is further limited.”
Tim McKibbin, REINSW CEO
If a first home buyer wishes to purchase a home with a standard 20% deposit – generally, what is needed to avoid mortgage lenders insurance – they would need to fork out $280,000 for a median-priced house in Sydney.
Even a $700,000 home would warrant a $140,000 deposit.
“As such, while first home buyers have played an active part in the current buying cycle, it appears this trend is unlikely to continue at the same pace,” he added.
In terms of the extended lockdown, the market has remained resilient.
The auction clearance rate has hovered around 70% and the number of existing property owners either upgrading or downsizing has kept the demand equation stacked in favour of vendors.
Mr McKibbin however, has reiterated that buyers need greater choice.
“The housing market is critically undersupplied and while this is widely recognised, the proposed solutions are taking too long to materialise,” he said.
“More choice through a greater diversity of housing typologies focused in metropolitan and regional areas is needed now.
“Some people are reportedly giving up on the idea of owning a home, but more choice might mean others won’t abandon their dreams.”