There is finally good news on the horizon for those wondering if mortgage rates in Australia will fall – they will, but not yet, says a property expert.
Lloyd Edge, an investor with a multi-million dollar portfolio of properties across the country, expects interest rates to start falling from the middle of next year.
A tip of more immediate use to those watching the real estate market: Mr. Edge also doesn’t expect there to be any more rate hikes between now and mid-2024.
Mr. Edge noted that interest rates have been raised to address high inflation, but the cost of living “has fallen to just over 5 percent in the past month, as opposed to 7 or 8 percent earlier this year.”
“So now that inflation is better under control, there is no reason for them to keep raising rates,” he claimed to Daily Mail Australia – although some major banks warned this week that another rate hike could come next month.
Lloyd Edge, a real estate expert with a multi-million dollar portfolio of homes across the country, expects interest rates to start falling from the middle of next year
Lloyd Edge, a real estate expert with a multi-million dollar portfolio of homes across the country, expects interest rates to start falling from the middle of next year. A for sale sign is shown
Australian property market: ‘A buyer’s market’…for now
Surveying the property market landscape, Mr Edge said most of 2023 has been a buyer’s market, so things have been quite subdued, with interest rates rising.
“That has deterred sellers (leading to a) lack of inventory in the market.
“There are a lot of buyers around, but they are only keeping an eye on interest rates, which have been suspended for the past four months.”
But the investor said the likelihood that rates will start falling in the second half of 2024 has led to higher prices in many areas.
“We’ve had about four months of consecutive house price growth in Sydney and Brisbane, and some regional markets are still doing well as well.”
Can young people buy a house in a big city?
Mr. Edge’s short answer is yes. “It’s certainly feasible, but I think people need to be a little more selective about what they buy and where they buy,” he said.
Mr Edge said homeowners’ ability to pay their mortgages has declined as interest rates have risen. Their ability to borrow money is also slightly lower than before.
He advises that people should broaden the horizons of what they are looking for and where their future home is located.
“Where people may have been looking for that house on a large piece of land, they may need to be looking more for an apartment or a townhouse and they may need to look in a slightly more suburban area compared to what they were looking for before.”
The property expert also said buyers should get good advice from a mortgage broker and shop around to get the best mortgage rates.
“If you can get a better interest rate, that would help you with your repayments and also be able to borrow more money,” he said.
He advises young people to broaden the horizons of what they are looking for and where it is located when buying a house
Are Australians selling property due to mortgage stress?
‘It’s not as widespread as (many) think, and it really comes down to some of the lower socio-economic areas where people are on one income and are struggling a bit (if) they’ve taken on too much debt on their mortgages Mr. Edge said.
“They’ve been talking about the mortgage cliff all year, but there hasn’t really been a huge explosion… it hasn’t really materialized at this stage.”
He said mortgage stress is even less common among those who own investment properties because the rent they earn generally covers the majority of their mortgage payments.
But he has come across some cases where investors have had to sell “if they bought a property with a high debt load and a very negative attitude.”
Mr Edge said this could happen in circumstances where ‘because interest rates have risen, rents in some areas may not have held up.’
Albury (pictured), on the border of NSW and Victoria, is an affordable regional city
Bundaberg (pictured) in south-east Queensland is also experiencing an influx of property buyers
Rule changes can be a ‘good opportunity’
A recent study found that higher taxes, new rental laws and rising interest rates have caused some real estate investors to sell their properties and leave the real estate market.
Mr Edge said he had seen that happen in Victoria, and also that people who invest in property are less likely to invest there for that reason.
“They’re moving to other areas, like Queensland, and looking for other reasons to buy there,” he said.
‘It’s going to be a bit tricky. Victoria has introduced these new rules and… it’s getting a bit stressful because it limits what you can earn from an investment property.
“So therefore, landlords will then reassess whether they can get an investment property in that condition or whether they even need to buy an investment property or whether they might get some other form of asset.”
The upside for some is that increased regulation could ultimately lead to property becoming more affordable in Victoria.
“It will take a while for it to flow through, but over time if there is less demand for property, prices will come down,” he said.
‘But that is a very nice opportunity for me. That’s when I would like to step in, because I think some of these rules could be reversed after a while.
“They’ve had (similar) rules in Queensland that they put in place and they’ve been rolled back.
“So if they reverse the rules in Victoria, it could be a good opportunity to buy when prices fall, and then take advantage of that when they move forward again.
“There’s certainly nothing wrong with jumping in and buying when prices drop a bit.”
Blue Lake and Valley Lake on Mount Gambier, South Australia are pictured. The area is proving popular with people looking for affordable housing
What regional areas should people be looking at?
With big cities becoming increasingly unaffordable for many, Mr Edge has some advice on where to find better prices.
“There are certainly some very affordable regional markets. One would be Bundaberg in South East Queensland, which has very good entry prices,” he said.
‘There is a lot of demand for that market up there. It’s close to the water, so there are good lifestyle choices.”
He said another city doing well is Albury, which sits on the border of NSW and Victoria and forms a sister city with Wodonga on the Victorian side.
Mr Edge said Albury was “halfway between Sydney and Melbourne”. It has a large population and very cheap prices compared to the capitals.
“We’ve seen people who can’t buy in Sydney or Melbourne because the prices are too high and they’re moving to some of these new markets.”
He said the trend started during the pandemic as people left cities and started working from home.
‘Now it’s more of an affordability issue, that people can’t really afford to buy that dream house in the capital, but you can (if you can) go to one of those regional markets.
‘Another one is Mount Gambier in South Australia. I don’t know if it’s lifestyle (there), but it’s much cheaper.’
Byron Bay on the NSW north coast has become a victim of its own success in recent years, becoming popular with multi-millionaire film stars and musicians, but there are other places that still look just as they did 20 years ago.
“(Byron Bay is) a bit of an anomaly, but I do think there are other markets that have that potential. One of these is Mollymook on the NSW south coast, two hours south of Sydney.
“That’s a very pristine coastal location where a lot of people move from Sydney, but it’s also the people who invest there, which is a bit like Byron.
‘Another place I really like is Merimbula, on the far south coast of NSW. I’ve seen prices really start to rise there.
“It’s the same kind of coastal location and lifestyle that buyers are looking for,” he said.
Merimbula (pictured) in southern NSW shows signs of the character of Byron Bay in northern NSW twenty years ago