May 2022

Real Estate Round Up #46

New design craze

COVID influenced architecture is the new craze sweeping the halls of architects everywhere, as this article from the ABC shows. Design features include extra bathrooms, ‘flex’ space, home office spaces that aren’t spare bedrooms, sound proofing, and even secret rooms for alone time.

Another COVID inspired home option is the pod. As noted in the domain article, if kept under a certain size, planning requirements are minimal. In the article, Alice Stolz describes these as a backyard office, garden pod or studio, but I think we need to call it what it is. If you strip it back to the core, what we’re talking about is a shed. Of course, this is much nicer than prefabricated garden sheds that you hide the mower in. These have guttering, carpet, proper design, painted walls and skylights, but the likelihood is the simpler planning rules were originally intended for a single car garage or tool shed.

Core Logic also reports other ways COVID has shaped the property market in this April article. For example, home values rose 25%, first homebuyer activity spiked, rents rose to record highs, housing debt peaked, and not to mention how much regional house prices have been affected.

Secret rooms are a new design trend post-COVID

First interest rate rise in over a decade

With interest rates rising for the first time in nearly 12 years, opinions and views this month were many and varied. Alice Stolz, Domain’s national managing editor describes the change as ‘a dark cloud’ (as part of a ‘silver lining’ metaphor), but considering the interest rate only rose 0.25% it’s more of a scattered cloud. Or, to look at it even more closely, considering the cost of property, a rumble of thunder in already very stormy weather. The ’weather’ could yet get a lot worse if there are a number of similar hikes over the coming year.

The main guts of the pros and cons of increased interest rates are:

  • Higher repayments for variable loans
  • Reduced borrowing power; but similarly
  • Potential dampening of the property market

According to this article in Domain, the time it takes for a rate hike to affect the property market is shortening, due primarily to the current very high prices and debt-to-income ratios we already have.

So time to upgrade then?

The announcement of the interest rates rises have barely faded from our ears, but already Domain claims it is ‘the perfect time’ to upgrade (note the word ‘upgrade’ as opposed to ‘buy your first home’). This particular article states that values have fallen an average of 2.8% in the December to March quarter for some of Sydney’s most expensive eastern suburbs. According to the article the median price for the area has fallen from a stratospheric $4.4 million, to a bargain basement $4,275,500. Hard to accept without tongue in cheek, but the Domain chief of research and economics, Nicola Powell, says this fall might be just the beginning.

Curiously, Kate Burke also from Domain writes that “smaller houses have taken the biggest hit to property prices in the cooling Sydney and Melbourne markets.” So the top and bottom of the market are both cooling? A major point of the article is to stress that this is the case in Melbourne but especially Sydney, where 2 bedroom houses fell 5.2%, whereas the median increased 0.2%. Having said that, this article notes the record and widening gap between the unit and house prices as well so basically the middle half of the housing market currently have the most resilient values.

CoreLogic describes the market as ‘softening’, again, perhaps in much the same way that a smaller sea urchin is softer than a slightly larger sea urchin.

“Virtually every capital city and major rest of state region has moved through a peak in the trend rate of growth some time last year or earlier this year,” said Tim Lawless, CoreLogic’s research director. “The sharpest slowdown has been in Sydney, where housing prices are the most unaffordable, advertised supply is trending higher and sales activity is down over the year.”

A rare feel good story

Finally, there was this touching story about a landlord who bequeathed the house to his renter. Doesn’t happen often, but perhaps there is hope yet.