How Are The Latest Interest Rate Cuts Affecting The Singleton Property Market?

Australians watched with great interest as the RBA made two interest-rate cuts in mid-2019, leading to speculation about how it would affect small business, real estate, and the wider economy.

We investigate what it means for property buyers and investors.

Major interest rate cuts: 50 basis points dropped in just two months

The official interest rate or cash rate is set by the Reserve Bank of Australia, or RBA, and it is one of the factors banks and other lenders take into account when they set interest rates on their home loan products.

Until mid this year, the official interest rate had remained steady at 1.5% – a rate it had been at since August 2016. But over June and July, the Reserve Bank made back-to-back cuts, slashing the rate to a historic low of 1%.

Mortgage holders watched keenly, and hoped that the banks would pass on these savings to them – and some have, either in part, or in full.

Why did they cut the interest rate?

According to RBA Governor Philip Lowe, the decision was made in order to “support employment growth and provide greater confidence that inflation will be consistent with the medium-term target”.

Governor Lowe also said that while most housing markets have remained soft, there are signs of stabilisation in major hubs like Sydney and Melbourne. In itself, this looks like good news, which could have a positive flow on to regional Australia and areas like the Hunter.

Looking at other metrics, we see some more good news. In its June 2019 Home Property Value Index, CoreLogic recorded just a 0.2% drop in national dwelling values. That’s the lowest month-on-month fall in well over a year – since March 2018. In Sydney, there was actually a 0.1% rise in value, and 0.2% in Melbourne. Both rises were the first for each capital city since mid to late 2017.

Recent changes to APRA serviceability restrictions

There’s also been a major move from the Australian Prudential Regulation Authority (APRA) to kick off the new financial year. APRA announced a loosening of its serviceability restrictions around home loan mortgage assessments.

What this means is that borrowers could now increase the size of their loans by up to 14%. This is because APRA officially updated its guidance on residential mortgage lending so that it “will no longer expect [ADIs] to assess home loan applications using a minimum interest rate of at least 7%”. Until now, banks have commonly used a rate of 7.25%.

Combined with historically low interest rates, these changes have already helped build confidence at auctions.

Election result brings certainty

The result of the federal election earlier this year is also building more certainty overall in the Australian property market.

This is because with the Coalition winning the federal election, Labor’s plans to remove negative gearing and increase capital gains tax are not going to see the light of day. This has given investors in particular renewed confidence, and means buyers have every reason to be positive in what seems to be the start of an upward-trending property market.

Why Hunter Valley market confidence is high

While buyers and sellers in capital cities like Sydney have witnessed a downturn in real estate values over the past 12 months, it’s been a slightly different story further north. According to realestate.com.au, prices in parts of the Hunter Valley and nearby Newcastle increased by up to 25% on the previous year.

According to OpenAgent, Pokolbin and Singleton were both named among the best NSW regions to invest in earlier this year, with 12% growth on unit values over the previous 12 months in Pokolbin, and 11.41% in Singleton.

A number of factors are playing into the region’s sustained property success, particularly infrastructure projects in Newcastle and the wider Hunter Valley:

  • A five-year, $50 million expansion project at Newcastle Airport which will see a majority cash injection to the local economy as well as create jobs.

  • A new $95 million creative industries and innovation hub at the University of Newcastle, allowing for more students and staff, thus generating more housing demand.

  • A new Maitland hospital in the vicinity of $470 million, boosting the local job market.

Want to leverage the Hunter’s market confidence?

Find your ideal home in the Hunter Valley region by contacting One Agency Lindy Harris today.

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