Housing market reinvigorated by low rate mortgage rates | Tim Lawless

Property market conditions have been bolstered by low rate mortgages and contributed in providing further stimulus to housing market conditions.

low interest ratesEven though the Reserve Bank (RBA) has left the cash rate unaltered, the February rate cut brought mortgage rates down to their lowest level since 1968; the first rate cut since August 2013 and the ninth drop in the cash rate since the RBA started easing rates back in November 2011.

To provide some perspective around rate cuts and what this means for a typical mortgage holder, before interest rates started falling in late 2011 a $400,000 mortgage would incur interest payments of $27,200 per annum (based on a discounted variable mortgage rate of 6.8%).

By March this year, with the average discounted variable rate now tracking at 4.9%, the annual interest payment would be $19,400, a saving of $7,800 per year or $150 per week.

With the improvement in household balance sheets since the latest rate cut we have seen a variety of timely indicators show a substantial upwards movement.

In line with increased movement across the property market auction clearance rates have surged to levels not seen since 2009 with the last three weeks of February (including March 1), seeing the combined capital city clearance rate move above 70 per cent, with the last two weeks recording a clearance above 76 per cent over both weeks.


auction gavel saleThe largest auction market, Melbourne, saw clearance rates move above 75 per cent over the final two weeks of the month and in Sydney (the second largest auction market) the results were even stronger with the rate of clearance higher than 80% over the past four weeks.

The higher auction clearance rates indicate that vendors have become more empowered as buyers compete more fiercely for available housing stock.

Around the country, the number of auctions being held has also picked up

The last week of February (including March 1) saw 3,132 auctions held across the capital cites which was 16 per cent higher than a year ago and auction numbers have been substantially higher than what was recorded in 2009 and 2010 when market conditions were also very strong.


While these auctions would have been scheduled prior to the cut in interest rates, we expect auction volumes will trend higher over the coming weeks.

Metadata flowing from CoreLogic RP Data’s valuation and real estate platforms virtually provides real-time insights into the level of industry activity currently underway across the housing and mortgage market.

Across the CoreLogic RP Data valuation platforms, which account for more than 95% of all mortgage related valuation instructions, the number of valuation events moved to new record levels in February.

The CoreLogic RP Data Mortgage Index, which tracks the number of valuation events on a rolling four week basis, surpassed the previous record high (which was in mid-December last year) over the month of February.


home loan mortgageThe high level of mortgage related activity can be attributed to both an increase in mortgage origination activity as well as refinancing activity.

Another hint that vendor confidence has grown since the latest rate cut, is the amount of real estate agent activity we are seeing across our RP Data Professional Platform.

Based on real estate agent activity across this platform, CoreLogic RP Data reported an overall increase in the number of Comparative Market Analysis (CMA) reports which moved to record highs in February. (Note: CMA reports are generally actioned when a real estate agent is preparing a listing presentation or preparing a home for sale.)

With real estate agent activity so high, we are expecting a consequent increase in the number of homes advertised for sale over the coming weeks.

The number of newly advertised properties has been tracking around average levels over February.


Over the same period a year ago the number of new listings entering the market across the capital cities was 2.4 per cent higher, however with the surge in real estate agent activity we would expect new listing numbers to surpass what was recorded last year over coming months.

The increase in market activity comes as no surprise.


Australian households are very sensitive to interest rate movements, given the vast majority of mortgage holders and newly originated mortgages are on variable mortgage rates.

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The challenge for the Reserve Bank and industry regulators will be to keep a lid on the rate of appreciation in home values while at the same time stimulating housing construction and household spending.

With the number of dwelling approvals currently at record highs, the ongoing high level of new housing construction will assist in adding new supply to the housing market as well as support economic growth and labour markets.

On the flipside, higher supply levels may help to slow the rate of capital growth.

We have already seen a slowdown in rental appreciation, whether this also translates to a slowdown in the rate of capital gain in the face of lower mortgage rates but higher levels of supply is yet to be seen.


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Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au

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